<PAGE> 1
WASATCH FUNDS
SUPPLEMENT
dated January 31, 1996
to the Prospectus dated January 31, 1996
Effective February 17, 1996, Sunstone Financial Group, Inc. ("Sunstone") will
replace Firstar Trust Company ("FTC") as transfer agent for Wasatch Funds and
UMB Bank, n.a. ("UMB") will replace FTC as custodian for Wasatch Funds. The
Prospectus describes the services to be provided by Sunstone and UMB and the
instructions for making purchases (by mail and by wire), redemptions and
exchanges on or after February 17, 1996.
INTERIM TRANSACTION PROCEDURES
It is important to take note of the following instructions to ensure proper
processing of new accounts, additional investments, and purchases by wire prior
to February 17, 1996:
Regular Mail: Overnight or Express Mail or
Hand Delivery:
Wasatch Funds
Shareholder Services Center Wasatch Funds
P.O. Box 701 Shareholder Services Center
Milwaukee, WI 53201-0701 Third Floor
615 East Michigan Street
Milwaukee, WI 53202
Wires:
Please call Wasatch Funds at 1-800-551-1700 prior to authorizing purchases by
wire in order to obtain proper wire instructions.
REVISED EXCHANGE PRIVILEGE
Effective February 17, 1996, the Northern U.S. Government Money Market Fund
will replace the Portico Money Market Fund as the new money market exchange
vehicle. The Prospectus describes this option and the related procedures.
Investors may not acquire shares of the Northern U.S. Government Money Market
Fund as part of the Wasatch Funds exchange privilege, nor directly exchange
from a Wasatch Fund to the Northern U.S. Government Money Market Fund, until
February 17, 1996.
<PAGE> 2
Prior to February 17, 1996, investors may continue to invest in and exchange
between Wasatch Funds and the Portico Money Market Fund. However, after
February 17, 1996, investors will not be able to directly exchange their
investments from the Portico Money Market Fund to Wasatch Funds. Rather, to
exchange into Wasatch Funds, investors will have to redeem their Portico Money
Market Fund investment and send the proceeds to Wasatch Funds. Investors
desiring to transfer their shares in the Portico Money Market Fund to the
Northern U.S. Government Money Market Fund should call Wasatch Funds for
instructions at 1-800-551-1700.
Questions regarding the procedures for purchases, redemptions and exchanges
should be directed to Wasatch Funds at 1-800-551-1700. Investors should retain
this Supplement with the Prospectus for future reference.
<PAGE> 3
WASATCH FUNDS
68 South Main Street
Salt Lake City, UT 84101
For Fund Information and
Shareholder Services:
1-800-551-1700
<PAGE> 4
WASATCH FUNDS
INVESTMENT INFORMATION
AND PROSPECTUS
JANUARY 1996
[LOGO]
<PAGE> 5
WASATCH FUNDS
WASATCH FUNDS
A family of true no-load funds created to help you reach your investment
objectives. In today's highly complex and dynamic world, discriminating between
numerous investment alternatives is a difficult task. Investing in mutual
funds is a way to secure expert advice that will help you maximize performance
and minimize risk consistent with a long-term investment strategy. Wasatch
Funds was founded in 1986 to enable individuals, pension and profit-sharing
plans, retirement funds, foundations, endowments and trusts to obtain quality
investment management on a more customized and personal basis than investment
services currently offered by other mutual fund companies.
The WASATCH AGGRESSIVE EQUITY FUND is designed for investors looking for
long-term growth of capital through investments in a non-diversified portfolio
of rapidly growing companies. The "flagship" of the Wasatch Fund Family, this
portfolio seeks to invest in companies the Manager believes possess attributes
that will enable them to double in size within five years. This Fund closed to
new shareholders in July 1995.
The WASATCH MICRO-CAP FUND was created for investors seeking long-term growth
of capital through investments in a non-diversified portfolio of rapidly
growing, small companies. The major distinction between the Wasatch Micro-Cap
Fund and the Wasatch Aggressive Equity Fund is that the Micro-Cap Fund will
primarily invest in smaller companies with market capitalizations less than
$150 million at the time of initial purchase. It is presently intended that the
Fund will close to new investors once its asset size reaches approximately $100
million.
The WASATCH GROWTH FUND is designed for more conservative equity investors
looking for long-term growth of capital through investments in a diversified
portfolio of companies the Manager believes to be relatively stable and yet
offer superior growth prospects. The Manager seeks companies with the potential
to become much larger and grow at more consistent, but slower rates than
companies in the Wasatch Aggressive Equity Fund, Wasatch Micro-Cap Fund or
Wasatch Mid-Cap Fund. When warranted by market conditions, the Fund will hold
more cash or other fixed income investments than the Wasatch Aggressive Equity
Fund, the Wasatch Mid-Cap Fund or the Wasatch Micro-Cap Fund.
The WASATCH MID-CAP FUND seeks long-term growth of capital through investments
in small- to mid-sized companies believed by the Manager to have exceptional
growth potential. The companies in this portfolio are expected by the Manager
to produce earnings growth at higher rates than companies in the Wasatch
Aggressive Equity Fund, the Wasatch Growth Fund or the Wasatch Micro-Cap Fund.
Anticipated higher growth rates may cause the Wasatch Mid-Cap Fund to be more
volatile than other Wasatch Funds.
The WASATCH INCOME FUND is a conservative fund which attempts to reward
shareholders with better than money market yields. Under normal market
conditions, the Fund will invest primarily in fixed income securities with
remaining maturities of less than three years. Investors should not consider
this a money market fund because, from time to time, the Fund will extend
maturities to take advantage of favorable market interest rates causing the net
asset value of the Fund to fluctuate. To achieve this objective the Fund can
invest in investment grade fixed income securities, including securities of the
United States government and its agencies, corporate bonds and notes,
convertible securities, preferred stocks, short-term securities, money market
instruments and cash.
<PAGE> 6
WASATCH FUNDS
Dear Investor:
Welcome to Wasatch Funds. Since the attached prospectus may be the only contact
our firm has with you as a potential investor, I urge you to consider it
carefully. I'm asking you to do this so you will understand some of the
characteristics that differentiate us from other mutual fund companies.
As you probably are aware, there are now more mutual funds than stocks. It has
become increasingly difficult for investors to distinguish one fund from
another. How should you decide which fund is most compatible with your
investment goals? Many investors look at past performance. Performance is
important--but let me remind you that while a fund's performance may be
impressive, it is also history and carries no guarantee of future results.
We believe the real question an investor must answer is, "Which fund or family
of funds is in the best position TODAY to provide me with the performance and
service I expect in the FUTURE?" For many investors the answer has been Wasatch
Funds. Read the prospectus, consider the information carefully and I think
you'll understand why.
We appreciate your interest in Wasatch Funds and invite you to become part of
the Wasatch family.
Yours truly,
/s/ Samuel S. Stewart, Jr.
- --------------------------
Samuel S. Stewart, Jr.
Chairman of the Board
[PHOTO]
"Attaining
financial objectives
is accomplished by
implementing
and following a
disciplined, consistent
investment program."
--Sam Stewart, PhD, CFA
Chairman of the Board
<PAGE> 7
[PHOTO]
"Our value
comes from the ability
to differentiate
between a potential
growth company and
one that will
stumble and fail.
This kind of judgment
can only come
from experience."
--Jeff Cardon, CFA
Senior Research Analyst
WHY WASATCH FUNDS?
SIX FEATURES SET OUR FUNDS APART
- - Experience - Original Research
- - Investment Focus - Risk Management
- - Small Size - Shareholder Commitment
EXPERIENCE
Wasatch Advisors, the advisor to the funds, was founded in 1975 and has been
specializing in growth stocks since its inception. Over the last 21 years
Wasatch has managed growth stocks when they have been both in and out of favor.
We believe this experience benefits our shareholders.
Because we are employee-owned there is little turnover of key people. Our
investment team has worked together for years. Wasatch has been a pioneer in
growth stock investing through our analytical work, published papers and
ongoing research. We continue to pursue excellence in our investment
discipline.
INVESTMENT FOCUS
Wasatch Funds invests in small- to mid-sized growth companies. While we offer
shareholders a variety of investment alternatives, our strategy focuses on
finding and investing in America's Best Growth Companies. It has been our
experience that in the long-run earnings growth drives stock prices. Wasatch's
focus on investing in high-quality, growth companies helps us avoid some of the
pitfalls associated with investing in the small- to mid-cap segment of the
market.
SIZE
Our ability to focus is related to the size of our company as well as the asset
size of our Funds. Wasatch's size gives us an advantage over many growth stock
competitors when you consider that the more money a fund has under management
the more difficult it is to buy smaller companies. Fund Managers
<PAGE> 8
with large sums under management must:
1. Buy bigger companies, which can hurt
performance;
2. Buy a larger number of companies, which can
dilute analytical efforts; or
3. Create other investment products, which can
divert focus.
When a growth fund manager who specializes in buying stock in small- to
mid-sized companies gets big, it becomes more difficult to maintain focus. We
believe that closing the Wasatch Aggressive Equity Fund in July 1995
demonstrates our commitment to maintaining the integrity of our growth
investing style and controlling the asset size of Wasatch Funds. To remain true
to our ideals, the Wasatch Micro-Cap Fund will be closed to new investors when
it reaches approximately $100 million in assets.
INTENSIVE RESEARCH PROCESS
Of the 10,000 publicly traded companies, the majority have market
capitalizations of less than $2 billion. Many of these companies are
undiscovered by Wall Street. Wasatch's value as a fund manager comes from
working within the niche of under-followed, under-valued companies. Wasatch
research analysts commit considerable time and resources to discover companies
with tremendous growth potential. Their goal is to buy stocks at reasonable
prices and capture dynamic earnings growth.
The Wasatch research team consists of eight professionals. All of the senior
members are Chartered Financial Analysts (CFAs). The team's only responsibility
is to find, invest in and monitor companies for Wasatch portfolios.
We conduct 90 percent of our research in-house. Analysts find and track
companies using the latest computer technology, continually updated databases
and industry contacts. After initial screenings, Wasatch researchers visit
prospective companies and
[PHOTO]
"Hands-on
securities analysis
supported by
rigorous research
is vital to the
success of
growth managers."
--Karey Barker, CFA
Senior Research Analyst
<PAGE> 9
[PHOTO]
"We manage risk in
Wasatch Funds' portfolios
by investing in
quality companies,
paying reasonable prices
for stocks and
consistently monitoring
our investments."
--Robert Gardiner
Senior Research Analyst
meet with top management. This fundamental "bottom-up" analytical approach
distinguishes Wasatch from other fund managers. Experience has shown that
face-to-face meetings enable analysts to gain valuable insight into the
company's ability to execute its business plan and produce the earnings growth
Wasatch has targeted as favorable for investors.
RISK MANAGEMENT
Some investors view small- to mid-sized stocks as risky. Wasatch Advisors
believes that smaller companies have the potential to provide greater growth
over a longer period of time than larger, more mature firms. We also
acknowledge that investing in the securities of such companies may involve
greater risk and portfolio price volatility. Wasatch has found that the
volatility of smaller stocks is often due to their lower market liquidity.
There are other reasons smaller companies can be risky. Many have less
diversified product lines, untested management teams or weaker financial
positions. We carefully monitor the companies Wasatch Funds invests in. To
manage risk in Fund portfolios, the research team has developed a three-tiered
process.
FIRST--we look for high-quality companies we call "America's Best Growth
Companies." These companies are characterized by: 1) Strong, financial
statements; 2) Fifteen to 25 percent minimum growth rate with a continuing
opportunity for growth; and 3) Solid top management with substantial inside
ownership.
SECOND--we are not willing to pay high prices for growth. We look for companies
with reasonable price-to-earnings ratios (P/E's) relative to their forecasted
growth rates.
THIRD--we limit risk by the way we construct Fund portfolios. We put more money
into some companies and less into others, depending on how we rank each
company's level of risk. Our approach to risk management seeks to limit
short-term volatility while capturing superior long-term performance.
<PAGE> 10
Shares of our equity funds will probably be subject to greater fluctuation in
value than shares of more conservative equity funds. Investors should consider
investments in Wasatch Funds as only a part of an overall, long-term investment
plan.
SHAREHOLDER COMMITMENT
Commitment to Wasatch Funds' shareholders and frequent communication is crucial
to helping investors develop confidence in the investment process. This is
especially true when investing in small- to mid-sized stocks. These stocks tend
to be more volatile in the short-term and can sometimes cause investors to get
the jitters. Wasatch experience has shown that successful investing in growth
stocks requires a time horizon of five years or longer. We believe
communication is the key to helping investors stay with their investment
strategy.
Wasatch Funds offers the following services to ensure that shareholders are
well-informed about their investments:
- - Quarterly Statements
- - Quarterly Newsletter and Mutual Fund Update
- - 800 Number for Account Information
- - 800 Number for Net Asset Value (NAV)
Information
- - 800 Number for Investment Guidance
- - Telephone Exchanges
- - Money Market Fund with Checkwriting Privileges
- - IRA Accounts, 403-B Plans and other Tax-Deferred
Retirement Plans
- - Fund Exchange Privileges
- - Automatic Investment Plan
- - Invitation to Annual Shareholders Meeting
Wasatch Funds values every shareholder. It is our sincere desire to foster
long, happy, profitable relationships with investors by providing the services
and contact necessary for making informed investment decisions.
[PHOTO]
"I enjoy
guiding shareholders
as they create
a road map to
attain financial objectives.
For some this means
becoming a homeowner,
for others it is
starting a college fund
for their children
or planning a
comfortable retirement."
--Jennifer Wilder
Premier Services Group Manager
<PAGE> 11
[LOGO]
QUESTIONS YOU MAY HAVE
ABOUT WASATCH FUNDS
ARE THERE ANY LOADS OR SALES FEES?
No. All of the Wasatch Funds are 100% no-load mutual funds. Our marketing
philosophy is to be among the top performing funds and gain recognition through
media attention and by other means.
HOW LONG HAS WASATCH ADVISORS BEEN MANAGING MONEY?
Wasatch Advisors, the investment advisor to Wasatch Funds, has been managing
money since 1975. Wasatch Funds began in 1986 with the Aggressive Equity Fund,
Growth Fund and Income Fund. In August 1992 we added the Mid-Cap Fund. The
Micro-Cap Fund was added to the Wasatch family in June 1995.
CAN I USE THE WASATCH FUNDS FOR MY IRA, KEOGH, 401(k) OR OTHER RETIREMENT PLANS?
Yes. Our Funds can be used for your IRA, SEP-IRA, Keogh, 401(k) and 403(b)(7).
If you would like to use our Funds for your retirement account, call us at
1-800-551-1700 and ask for an IRA Information Kit.
CAN I MOVE MY INVESTMENTS FROM ONE FUND TO ANOTHER?
You can switch among our Funds quite easily.* Just call, fax or write and we
will transfer your investments at no charge.**
*The Wasatch Aggressive Equity Fund closed to new shareholders in July 1995.
**The exchange policy may be modified at any time; an early redemption fee may
be imposed.
<PAGE> 12
7
DO YOU HAVE AN AUTOMATIC INVESTMENT PLAN?
Yes, and we have lowered the minimum initial investment to $1,000 for investors
using this plan. The plan allows you to automatically invest in our Funds
directly from your bank account either monthly or quarterly in amounts of $100
or more.
WHEN DO THE FUNDS PAY DIVIDENDS?
All of the equity funds pay dividends once a year, normally in the last week of
December. We encourage shareholders to automatically reinvest their dividends
in order to enhance the compounding of their returns. However, you may have
dividend checks sent to you. The Wasatch Income Fund pays dividends monthly.
HOW OFTEN DO I GET STATEMENTS? You will receive quarterly statements along with
a newsletter and quarterly report. You can call 1-800-551-1700 any time to get
your current account balance.
IS THERE A MONEY MARKET FUND AVAILABLE?
Yes. The Northern U.S. Government Money Market Fund is available to Wasatch
Funds shareholders. The prospectus to the money market fund is not attached. To
request a Northern prospectus, call 1-800-551-1700. Please read the prospectus
carefully before you invest.
This may be used as sales literature when preceded or accompanied by a current
prospectus. The prospectus gives details about charges, investment objectives,
risks and operating policies of the Funds.
Please read it carefully before investing.
<PAGE> 13
TABLE OF CONTENTS
<TABLE>
<S> <C>
Annual Fund Expenses ........................... 2
Financial Highlights ........................... 3
Aggressive Equity Fund ................... 4
Micro-Cap Fund ........................... 5
Growth Fund .............................. 6
Mid-Cap Fund ............................. 8
Income Fund .............................. 10
Performance Data ............................... 12
Investment Objectives, Policies and Risks ...... 13
Aggressive Equity Fund ................... 13
Micro-Cap Fund ........................... 16
Growth Fund .............................. 17
Mid-Cap Fund ............................. 18
Income Fund .............................. 19
Portfolio Turnover ............................. 21
Management of the Company ...................... 22
Advisory and Other Agreements ............ 23
Expenses ................................. 24
Organization of the Company .................... 25
Purchase of Shares ............................. 26
Initial Investment ....................... 26
Subsequent Investments ................... 27
General Information ...................... 27
Automatic Investment Plan ................ 28
Retirement Plans ............................... 28
Exchange Privilege ............................. 29
Redemption of Shares ........................... 31
Systematic Withdrawal Plan ............... 34
Net Asset Value and Days of Operation .......... 34
Shareholder Reports ............................ 35
Dividends, Capital Gains Distributions and Taxes 35
Dividends ................................ 35
Capital Gains ............................ 35
Taxes .................................... 36
Additional Information ......................... 37
</TABLE>
<PAGE> 14
PROSPECTUS
JANUARY 31, 1996
WASATCH FUNDS, INC. (the "Company" or "Wasatch Funds") is a no-load mutual fund
consisting of five separate series (the "Funds") which offer a variety of
investment opportunities.
WASATCH AGGRESSIVE EQUITY FUND seeks long-term growth of capital through
investments in common stock of companies believed by the Fund manager, Wasatch
Advisors, Inc. (the "Manager"), to possess superior growth potential. Income is
a secondary objective to be sought only when consistent with the primary
objective. The major distinction between the Wasatch Aggressive Equity Fund and
the Wasatch Growth Fund is that the Aggressive Equity Fund is a non-diversified
fund and thus can be more heavily weighted in fewer stocks and is subject to
greater risk than the Growth Fund, which is a diversified fund. The Aggressive
Equity Fund is currently closed to new investors.
WASATCH MICRO-CAP FUND, a non-diversified fund, seeks long-term growth of
capital. The Fund seeks this objective by investing primarily in common stock
of small capitalization companies believed by the Manager to possess superior
growth potential. The major distinction between the Wasatch Micro-Cap Fund and
the Wasatch Aggressive Equity Fund is that the Micro-Cap Fund will normally
invest primarily in common stocks of companies with market capitalizations of
less than $150 million at the time of the initial purchase. It is presently
intended that the Micro-Cap Fund will close to new investors when it reaches
$100 million in assets.
WASATCH GROWTH FUND seeks long-term growth of capital through investments in a
diversified portfolio of common stock of companies believed by the Manager to
possess superior growth potential. Income is a secondary objective to be sought
only when consistent with the primary objective. The Fund seeks investments in
companies that may have the potential to become much larger and grow at more
consistent, but slower rates than the companies typically in the Wasatch
Aggressive Equity Fund, the Wasatch Mid-Cap Fund and the Wasatch Micro-Cap
Fund.
WASATCH MID-CAP FUND, a non-diversified fund, seeks long-term growth of capital
through investments in common stock of mid-sized companies believed by the
Manager to possess superior growth potential. Income is a secondary objective
to be sought only when consistent with the primary objective. The companies in
this portfolio are expected by the Manager to grow their earnings at higher
rates than the companies in the Wasatch Aggressive Equity Fund, the Wasatch
Growth Fund, or the Wasatch Micro-Cap Fund. These anticipated higher growth
rates may cause the Wasatch Mid-Cap Fund to be more volatile than the other
Wasatch Funds.
WASATCH INCOME FUND seeks to receive current income at low risk by investing in
fixed income securities. The secondary objective is appreciation of capital.
This Prospectus sets forth concisely the information about the Company that a
prospective investor ought to know prior to investing. Investors are advised to
read this Prospectus and retain it for future reference.
Additional information about the Company has been filed with the Securities and
Exchange Commission in a Statement of Additional Information dated January 31,
1996 and is available without charge upon request from the Company. The
Statement of Additional Information is hereby incorporated by reference into
this Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<PAGE> 15
2 PROSPECTUS
ANNUAL FUND EXPENSES
The Funds are 100% no-load; there are no fees to purchase shares, nor any
ongoing marketing ("12b-1") expenses. Lower expenses benefit shareholders by
increasing the Funds' investment return.
<TABLE>
<CAPTION>
AGGRESSIVE MICRO-
EQUITY CAP GROWTH MID-CAP INCOME
FUND FUND FUND FUND FUND
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SHAREHOLDER
TRANSACTION EXPENSES
Sales Load Imposed on Purchases none none none none none
Sales Load Imposed on
Reinvested Dividends none none none none none
Deferred Sales Load none none none none none
Redemption Fee1 none none none none none
Exchange Fees none none none none none
ANNUAL FUND
OPERATING EXPENSES
(as a percentage of average
net assets)
Management Fees 1.00%(2) 2.00%(2) 1.00%(2) 1.25%(2) 0.50%
12b-1 Fees none none none none none
Other Expenses
(after reimbursements)(3) 0.47% 0.50% 0.50% 0.50% 0.50%
- --------------------------------------------------------------------------------
Total Fund Operating Expenses
(after reimbursements) 1.47% 2.50% 1.50% 1.75% 1.00%
================================================================================
</TABLE>
(1) The Custodian charges a $7.50 fee for each wire redemption.
(2) Such annual rates are higher than the rates paid by most registered
investment companies.
(3) The Annual Fund Operating Expense information represents actual expenses
(after reimbursement) for the fiscal year ending September 30, 1995 for all
Funds. The Manager has voluntarily agreed to limit the total expenses of
the Aggressive Equity and Growth Funds to 1.50%, the Micro-Cap Fund to
2.50%, the Mid-Cap Fund to 1.75% and the Income Fund to 1.00% of each
respective Fund's average net assets computed on a daily basis. If the
expense reimbursements were eliminated, Other Expenses and Total Fund
Operating Expenses for the fiscal year ended September 30, 1995 would have
been 1.40% and 3.40% for the Micro-Cap Fund, 0.58% and 1.58% for the Growth
Fund, 0.69% and 1.94% for the Mid-Cap Fund, and 1.09% and 1.59% for the
Income Fund, respectively. There were no reimbursements for the Aggressive
Equity Fund.
<PAGE> 16
PROSPECTUS 3
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming (i) 5%
annual return and (ii) redemption at the end of each time period:
<TABLE>
<CAPTION>
AGGRESSIVE MICRO-
EQUITY CAP GROWTH MID-CAP INCOME
FUND FUND FUND FUND FUND
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 year $ 15 $ 26 $ 15 $ 18 $ 10
3 years 47 79 47 59 32
5 years 81 136 82 98 55
10 years 178 289 179 212 122
</TABLE>
The purpose of the tables is to help you understand the various costs and
expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in shares of the Funds. For additional
information, see "Management of the Company," below.
The information contained in the tables should not be considered a
representation of past or future expenses. Actual expenses may be greater or
less than those shown.
FINANCIAL HIGHLIGHTS
The following information for an Aggressive Equity Fund, Growth Fund, Mid-Cap
Fund and Income Fund share outstanding for the years ended September 30, 1993,
1994 and 1995 and for a Micro-Cap Fund share outstanding for the period June
19, 1995 through September 30, 1995 has been audited by Arthur Andersen LLP,
independent accountants, whose report thereon appears in the Statement of
Additional Information. This information should be read in conjunction with the
financial statements appearing in the Funds' 1995 Annual Report to Shareholders
and included in the Statement of Additional Information. Information in the
Financial Highlights for the year ended September 30, 1992 and all prior
periods were audited by other independent accountants. Further information
about the performance of the Funds is contained in the Funds' Annual Report to
Shareholders, which may be obtained without charge by calling the Funds at
1-800-551-1700 or writing the Funds at P.O. Box 2172, Milwaukee, WI 53201-2172.
<PAGE> 17
4 PROSPECTUS
AGGRESSIVE EQUITY FUND
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
1995 1994 1993 1992
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $19.96 $19.75 $15.23 $16.42
Income (loss) from investment operations:
Net investment (loss) income (0.04) (0.02) (0.09) (0.03)
Net realized and unrealized
gains (losses) on securities 6.59 1.33 5.40 (0.26)
------ ------ ------ ------
Total from investment operations 6.55 1.31 5.31 (0.29)
Less distributions:
Dividends from net investment
income -- -- -- --
Distributions from net realized
gains (1.51) (1.10) (0.79) (0.90)
------ ------ ------ ------
Total distributions (1.51) (1.10) (0.79) (0.90)
------ ------ ------ ------
Net asset value, end of period $25.00 $19.96 $19.75 $15.23
====== ====== ====== ======
Total return(2) 35.19% 6.85% 35.73% (2.30)%
Supplemental data and ratios:
Net assets, end of period
(in thousands) $305,311 $46,369 $23,293 $12,542
Ratio of expenses to average
net assets(2), (3) 1.47% 1.50% 1.50% 1.51%
Ratio of net (loss) income to
average net assets(3) (0.37)% (0.67)% (0.77)% (0.41)%
Portfolio turnover rate 29% 64% 70% 32%
</TABLE>
(1) Commencement of operations
(2) Not annualized for periods less than a year
(3) Net of reimbursements by advisor. Absent reimbursement of expenses by
advisor, except for the year ended September 30, 1995 where there were no
reimbursements, the ratio of expenses to average net assets for the
Aggressive Equity Fund would be 1.52%, 1.64%, 1.69%, 1.67%, 1.75%, 1.91%,
2.03% and 1.36%, respectively, and the ratio of net income (loss) to
average net assets would be (0.69)%, (0.92)%, (0.59)%, (0.52)%, (0.27)%,
(0.55)%, (0.22)% and 0.06%, respectively. The ratio of expenses to average
net assets for the Micro-Cap Fund would be 3.40% and the ratio of net loss
to average net assets would be (1.66)%.
<PAGE> 18
PROSPECTUS 5
<TABLE>
<CAPTION>
MICRO-CAP
FUND
DEC. 6, 1986(1) JUNE 19, 1995(1)
YEAR ENDED SEPTEMBER 30, THROUGH THROUGH
1991 1990 1989 1988 SEPT. 30, 1987 SEPT. 30, 1995
------- ------- ----- ------- ----------------- ------------------
<S> <S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 9.77 $10.92 $ 9.07 $11.76 $10.00 $ 2.00
Income (loss) from investment operations:
Net investment (loss) income (0.04) 0.01 (0.01) 0.03 0.02 --
Net realized and unrealized
gains (losses) on securities 6.69 (1.16) 1.91 (1.66) 1.74 0.72
------ ------ ------ ------ ----- -------
Total from investment operations 6.65 (1.15) 1.90 (1.63) 1.76 0.72
Less distributions:
Dividends from net investment
income -- -- (0.05) (0.01) -- --
Distributions from net realized
gains -- -- -- (1.05) -- --
------ ------ ------ ------ ----- -------
Total distributions -- -- (0.05) (1.06) -- --
------ ------ ------ ------ ----- -------
Net asset value, end of period
$16.42 $ 9.77 $10.92 $ 9.07 $11.76 $ 2.72
====== ====== ====== ====== ====== =======
Total return(2) 68.07% (10.53)% 21.09% (13.17)% 17.60% 36.00%
Supplemental data and ratios:
Net assets, end of period
(in thousands)
Ratio of expenses to average $7,588 $2,767 $1,191 $ 833 $1,266 $25,368
net assets(2), (3)
Ratio of net (loss) income to 1.51% 1.56% 1.50% 1.50% 1.26% 2.50%
average net assets3
Portfolio turnover rate (0.36)% 0.08% (0.12)% 0.30% 0.16% (0.76)%
41% 74% 82% 71% 58% 0%
</TABLE>
<PAGE> 19
6 PROSPECTUS
GROWTH FUND
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
1995 1994 1993 1992
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net asset value, $ 15.30 $ 15.68 $ 13.64 $ 15.01
beginning of period
Income (loss) from investment operations:
Net investment income (loss) 0.02 (0.14) (0.08) (0.02)
Net realized and unrealized 4.59 0.71 3.21 (0.45)
gains (losses) on securities ------- ------- ------- -------
Total from investment operations 4.61 0.57 3.13 (0.47)
Less distributions:
Dividends from net investment
income -- -- -- (0.04)
Distributions from net realized
gains (3.94) (0.95) (1.09) (0.86)
------- ------- ------- -------
Total distributions (3.94) (0.95) (1.09) (0.90)
------- ------- ------- -------
Net asset value, end of period $ 15.97 $ 15.30 $ 15.68 $ 13.64
======= ======= ======= =======
Total return(2) 39.76% 3.75% 23.57% (3.61)%
Supplemental data and ratios:
Net assets, end of period
(in thousands) $53,533 $11,219 $17,619 $14,243
Ratio of expenses to average
net assets(2), (3) 1.50% 1.50% 1.50% 1.49%
Ratio of net income (loss) to
average net assets(3) 0.29% (0.51)% (0.55)% 0.15%
Portfolio turnover rate 88% 163% 104% 40%
</TABLE>
(1) Commencement of operations
(2) Not annualized for the period ended September 30, 1987
(3) Net of reimbursements by advisor. Absent reimbursement of expenses by
advisor, the ratio of expenses to average net assets would be 1.58%, 1.64%,
1.61%, 1.67%, 1.66%, 2.02%, 1.89%, 1.91% and 1.37%, respectively, and the
ratio of net income (loss) to average net assets would be 0.21%, (0.64)%,
(0.66)%, (0.03)%, 0.36%, 1.29%, 0.96%, 0.80% and 0.06%, respectively.
<PAGE> 20
PROSPECTUS 7
<TABLE>
<CAPTION>
DEC. 6, 1986
YEAR ENDED SEPTEMBER 30, THROUGH
1991 1990 1989 1988 SEPT. 30, 1987
------ ------ ------ ------ --------------
<S> <S> <C> <C> <C> <C>
Net asset value,
beginning of period $ 10.73 $11.39 $ 9.48 $11.47 $10.00
Income (loss) from investment operations:
Net investment income (loss) 0.08 0.10 0.13 0.10 0.01
Net realized and unrealized 5.16 (0.65) 1.89 (1.67) 1.46
gains (losses) on securities ------- ------ ------ ------ ------
Total from investment operations 5.24 (0.55) 2.02 (1.57) 1.47
Less distributions:
Dividends from net investment
income (0.16) (0.11) (0.11) (0.02) --
Distributions from net realized
gains (0.80) -- -- (0.40) --
------- ------ ------ ------ ------
Total distributions (0.96) (0.11) (0.11) (0.42) --
------- ------ ------ ------ ------
Net asset value, end of period $ 15.01 $10.73 $11.39 $ 9.48 $11.47
======= ====== ====== ====== ======
Total return(2) 51.90% (4.82)% 21.60% (13.39)% 14.70%
Supplemental data and ratios:
Net assets, end of period
(in thousands) $11,651 $4,574 $3,378 $2,605 $2,699
Ratio of expenses to average
net assets(2), (3) 1.51% 1.87% 1.50% 1.50% 1.25%
Ratio of net income (loss) to
average net assets(3) 0.51% 1.45% 1.37% 1.21% 0.18%
Portfolio turnover rate 37% 69% 63% 88% 50%
</TABLE>
<PAGE> 21
8 PROSPECTUS
MID-CAP FUND
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30,
<S> <C> <C>
1995 1994
-------- --------
Net asset value,
beginning of period $11.02 $10.51
Income from investment operations:
Net investment loss (0.02) (0.27)
Net realized and unrealized
gains (losses) on securities 7.64 0.78
-------- --------
Total from investment operations 7.62 0.51
Less distributions:
Dividends from net investment -- --
income
Distributions from net realized
gains (0.03) --
-------- --------
Total distributions (0.03) --
-------- --------
Net asset value, end of period $18.61 $11.02
======== ========
Total return(2) 69.24 % 4.85 %
Supplemental data and ratios:
Net assets, end of period
(in thousands) $98,605 $1,091
Ratio of expenses to average
net assets(2), (3) 1.75 % 1.75 %
Ratio of net loss to
average net assets(3) (0.71)% (1.19)%
Portfolio turnover rate 46 % 213 %
</TABLE>
(1) Commencement of operations
(2) Not annualized for the period ended September 30, 1992
(3) Net of reimbursements by advisor. Absent reimbursement of expenses by
advisor, the ratio of expenses to average net assets would be 1.94%, 3.33%,
2.69% and 7.65%, respectively, and the ratio of net loss to average net
assets would be (0.90)%, (2.76)%, (1.81)% and (6.47)%, respectively.
<PAGE> 22
PROSPECTUS 9
<TABLE>
<CAPTION>
YEAR ENDED AUG. 16, 1992(1)
SEPTEMBER 30, THROUGH
1993 SEPT. 30, 1992
------------- ----------------
<S> <C>
$ 9.93 $10.00
(0.07) --
0.65 (0.07)
------ ------
0.58 (0.07)
-- --
-- --
------ ------
-- --
------ ------
$10.51 $ 9.93
====== ======
5.85 % (0.70)%
$2,451 $ 148
1.74 % 1.56 %
(0.86)% (0.38)%
113 % 40 %
</TABLE>
<PAGE> 23
10 PROSPECTUS
INCOME FUND
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
1995 1994 1993 1992
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $10.09 $10.42 $11.17 $11.14
Income from investment operations:
Net investment income (loss) 0.56 0.55 0.55 (0.03)
Net realized and unrealized
gains (losses) on securities 0.44 (0.40) (0.17) 0.94
------ ------ ------ ------
Total from investment operations 1.00 0.15 0.38 0.91
Less distributions:
Dividends from net investment
income (0.59) (0.46) (0.53) (0.56)
Distributions from net realized
gains -- (0.02) (0.60) (0.32)
------ ------ ------ ------
Total distributions (0.59) (0.48) (1.13) (0.88)
------ ------ ------ ------
Net asset value, end of period $10.50 $10.09 $10.42 $11.17
====== ====== ====== ======
Total return(2) 10.46% 1.51% 3.80% 8.44%
Supplemental data and ratios:
Net assets, end of period
(in thousands) $4,035 $3,250 $3,748 $5,234
Ratio of expenses to average
net assets(2), (3) 1.00% 1.00% 1.00% 1.00%
Ratio of net income to
average net assets(3) 5.88% 5.15% 4.60% 4.90%
Portfolio turnover rate 43% 45% 46% 95%
</TABLE>
(1) Commencement of operations
(2) Not annualized for the period ended September 30, 1987
(3) Net of reimbursements by advisor. Absent reimbursement of expenses by
advisor, the ratio of expenses to average net assets would be 1.59%, 1.39%,
1.35%, 1.20%, 1.20%, 1.57%, 1.42%, 1.35% and 1.20%, respectively, and the
ratio of net income to average net assets would be 5.29%, 4.76%, 4.24%,
4.71%, 6.59%, 9.75%, 7.82%, 8.06% and 5.70%, respectively.
<PAGE> 24
PROSPECTUS 11
<TABLE>
<CAPTION>
DEC. 6, 1986(1)
YEAR ENDED SEPTEMBER 30, THROUGH
1991 1990 1989 1988 SEPT. 30, 1987
-------- -------- -------- -------- --------------
<S> <C> <C> <C> <C>
$10.13 $10.61 $10.64 $10.19 $10.00
0.58 0.69 1.25 0.81 0.39
1.24 (0.19) (0.06) 0.25 (0.20)
------ ------ ------ ------ ------
1.82 0.50 1.19 1.06 0.19
(0.81) (0.69) (1.22) (0.61) --
-- (0.29) -- -- --
------ ------ ------ ------ ------
(0.81) (0.98) (1.22) (0.61) --
------ ------ ------ ------ ------
$11.14 $10.13 $10.61 $10.64 $10.19
====== ====== ====== ====== ======
18.74 % 4.87 % 12.50 % 10.84 % 1.90 %
$3,540 $1,771 $1,119 $816 $504
1.01 % 1.32 % 0.99 % 0.95 % 0.94 %
6.79 % 10.00 % 8.25 % 8.47 % 5.97 %
66 % 71 % 29 % 30 % --
</TABLE>
<PAGE> 25
12 PROSPECTUS
PERFORMANCE DATA
From time to time, total return and yield data for a Fund may be quoted in
advertisements or in communications to shareholders. A Fund's total return will
be calculated on an average annual (compound) total return basis and may also
be calculated on a cumulative total return basis for various periods from the
date it commences operations. Average annual total return reflects the average
annual percentage change in value of an investment in a Fund over the measuring
period. Cumulative total return reflects the total percentage change in value
over the measuring period. Both methods of calculating total return assume that
dividends and capital gain distributions made by a Fund during the period are
reinvested in Fund shares.
Yield is computed based on the net income of a Fund during a 30-day (or
one-month) period, which will be identified in connection with the particular
yield quotation. More specifically, the yield is computed by dividing a Fund's
net income per share during a 30-day (or one-month) period by the net asset
value per share on the last day of the period and annualizing the result on a
semi-annual basis.
The total return and yield of a Fund may be compared to those of other mutual
funds including those with similar investment objectives and to stock, bond and
other relevant indices or to rankings prepared by independent services or other
financial or industry publications that monitor the performance of mutual
funds. For example, the total return and yield of a Fund's shares may be
compared to data prepared by Lipper Analytical Services, Inc. In addition, the
total return of a Fund may be compared to the S&P 500 Stock Index, the Nasdaq
Composite Index, an index of unmanaged groups of common stocks of domestic
companies that are quoted on the National Association of Securities Dealers
Quotation System, the Dow Jones Industrial Average, a recognized unmanaged
index of common stocks of 30 industrial companies listed on the New York Stock
Exchange (the "Exchange") and the Consumer Price Index. Total return and yield
data as reported in national publications such as Money Magazine, Forbes,
Barron's, The Wall Street Journal and The New York Times, or in publications of
a local or regional nature, may also be used in comparing the performance of a
Fund.
Performance quotations of a Fund represent the Fund's past performance and
should not be considered as representative of future results. The investment
return and principal value of an investment in a Fund will fluctuate so an
investor's shares, when redeemed, may be worth more or less than their original
cost. The methods used to compute a Fund's total return and yield are described
in more detail in the Statement of Additional Information.
<PAGE> 26
PROSPECTUS 13
The Funds' total returns (including fees and other expenses) for specified
periods ended September 30, 1995, were as follows:
<TABLE>
AVERAGE ANNUAL RETURNS
ONE THREE FIVE SINCE
YEAR YEARS YEARS INCEPTION(1)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aggressive Equity 35.2% 25.2% 26.3% 15.5%
Micro-Cap -- -- -- 36.0%(2)
Growth 39.8% 21.5% 21.3% 13.3%
Mid-Cap 69.2% 23.4% -- 22.1%
Income 10.5% 5.2% 8.4% 8.2%
</TABLE>
(1) Inception date for all Funds except the Mid-Cap and Micro-Cap Funds was
December 6, 1986; the Mid-Cap Fund's inception date was August 16, 1992; the
Micro-Cap Fund's inception date was June 19, 1995.
(2) Not annualized.
The Funds charged no sales loads, redemption fees, or other similar fees as of
September 30, 1995. Accordingly, both purchase price and redemption price equal
net asset value per share, and no adjustments are made in either yield or total
return performance calculations to reflect nonrecurring charges.
INVESTMENT OBJECTIVES, POLICIES AND RISKS
The Investment Objectives presented below cannot be changed without shareholder
approval. Since all investments are subject to inherent market risks there is
no assurance these objectives will be achieved. The Investment Policies and
Techniques employed in pursuit of the Funds' objectives may be changed without
shareholder approval.
AGGRESSIVE EQUITY FUND
Currently, the Aggressive Equity Fund is closed to new investors. The Fund's
current shareholders and certain others may continue to add to an existing
account or open new accounts. (See "Purchase of Shares.") The Fund may resume
sales to new investors at some future date, but it has no present intention to
do so.
INVESTMENT OBJECTIVE--The primary investment objective of the Aggressive Equity
Fund is long-term growth of capital through investments in common stock of
companies believed by the Manager to possess superior growth potential. Income
is a secondary objective to be sought only when consistent with the primary
objective. The "Flagship" of the Wasatch Fund Family, this portfolio seeks to
invest in companies believed by the Manager to be rapidly growing, to be
smaller but have the potential to become much
<PAGE> 27
14 PROSPECTUS
larger. The major distinction between the Aggressive Equity Fund and the Growth
Fund is that the Aggressive Equity Fund is a non-diversified fund and thus can
be more heavily weighted in fewer stocks than the Growth Fund, which is a
diversified fund.
INVESTMENT POLICIES AND TECHNIQUES--The Aggressive Equity Fund will normally
invest at least 65% of its total assets in common stocks of growth companies
which are believed by the Manager to have significantly better prospects than
most companies for long-term capital appreciation based on historical and
projected rates of earnings growth or on development of new products and
services.
The Fund may also invest in investment grade convertible securities (preferred
stocks and bonds which may have either attached warrants or a conversion
privilege into common stocks). At times, when economic conditions or general
levels of common stock prices are such that the Manager deems it prudent to
adopt a temporary defensive position by reducing or curtailing investments in
common stocks, a larger proportion than usual of the Fund's assets may be
invested in preferred stocks, government securities, investment grade debt
securities, or money market instruments including, but not limited to, Treasury
Bills, certificates of deposit, eurodollars, repurchase agreements, commercial
paper and master demand notes (which are demand instruments without a fixed
maturity bearing interest at rates which are fixed to known lending rates and
automatically adjusted when such lending rates change) and cash. Debt
obligations acquired will be investment grade at the time of purchase, that is,
obligations rated within the four highest rating categories by Moody's
Investors Service, Inc. ("Moody's") (Baa or higher), Standard & Poor's
Corporation ("S&P") (BBB or higher), or other nationally recognized rating
agencies or obligations unrated but deemed by the Manager to be comparable in
quality to instruments that are so rated. Obligations rated in the lowest of
the top four ratings, though considered investment grade, are considered to
have speculative characteristics, and changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than is the case with higher rated securities. Subsequent
to its purchase by the Fund, a rated security may cease to be rated or its
rating may be reduced below the minimum rating required for purchase by the
Fund. The Manager will consider such an event in determining whether the Fund
should continue to hold the security. The Manager expects, however, to sell
promptly any securities that are non-investment grade as a result of these
events that exceed 5% of the Fund's net assets. See the Statement of Additional
Information for a description of applicable debt ratings.
The Fund may invest a substantial portion of its assets in small capitalization
companies. While small capitalization companies generally have potential for
rapid growth, they often involve higher risks because they lack the management
experience, financial resources, product diversification and competitive
strengths of larger companies. In addition, in many instances, the frequency
and volume of their trading is substantially less than is typical of larger
companies. Therefore, the securities of smaller companies may be subject
<PAGE> 28
PROSPECTUS 15
to wider price fluctuations. The spreads between the bid and asked prices of the
securities of these companies are typically larger than the spreads for more
actively traded securities. As a result, the Fund could incur a loss if it
determined to sell such a security shortly after its acquisition. When making
large sales, the Fund may have to sell portfolio holdings at discount from
quoted prices or may have to make a series of small sales over an extended
period of time due to the trading volume of smaller company securities. The
values of the shares of small capitalization companies may move independently of
the values of larger capitalization companies or of general stock market indices
such as the Dow Jones Industrial Average and the Standard & Poor's 500 Stock
Index.
The Fund may invest up to 15% of its total assets at the time of purchase in
foreign securities. (Securities of foreign issuers which are publicly traded in
the United States, either directly or through American Depository Receipts, are
not subject to this 15% limitation.) Foreign investments may be subject to
special risks, including those resulting from fluctuation in currency exchange
rates, revaluation of currencies, future political and economic developments,
the possible imposition of additional withholding taxes on dividend or interest
income payable on the securities, the seizure or nationalization of companies,
or establishment of exchange controls or adoption of other restrictions which
might adversely affect the investment. Foreign companies not publicly traded in
the U.S. are not subject to the regulatory requirements of U.S. companies and,
as such, there may be less publicly available information about such companies.
Moreover, foreign companies are not subject to uniform accounting, auditing and
financial reporting standards and requirements comparable to those applicable
to U.S. companies. Because of these and other factors, securities of foreign
companies acquired by the Funds may be subject to greater fluctuation than
securities of domestic companies.
The Fund may also invest up to 5% of its total assets at the time of purchase
in "Special Situations," which the Manager defines as companies in the process
of reorganization or buy-out. Such companies may have limited financial
resources or may be dependent upon a small management group and their
securities may be subject to more abrupt or erratic market movements.
The Aggressive Equity Fund is a non-diversified investment company. This means
that the Fund is not restricted by the provisions of the Investment Company Act
of 1940 with respect to the diversification of its investments. As a matter of
fundamental policy which may not be changed without shareholder vote, however,
as to 50% of the Fund's total assets, the Fund will not purchase additional
securities of individual companies in which the Fund has invested 5% of the
Fund's total assets or has acquired more than 10% of the outstanding voting
securities of such company, measured at the time of each such investment.
Because the Fund's "non-diversified status" permits the investment of a greater
portion of the Fund's assets in the securities of individual companies than
would be permissible under a "diversified status," the Fund's "non-diversified
status" is considered to subject the Fund to a greater degree of risk.
<PAGE> 29
16 PROSPECTUS
MICRO-CAP FUND
It is presently intended that the Micro-Cap Fund will close to new investors
when it reaches $100 million in assets. At that time, the Fund will determine
whether to permit continued investments by existing shareholders or others. The
Fund reserves the right to reconsider closing the Fund at any time and may
close the Fund but resume sales at a later date.
INVESTMENT OBJECTIVE--The primary investment objective of the Micro-Cap Fund is
long-term growth of capital. The Fund seeks this objective by investing
primarily in common stocks of small companies believed by the Manager to
possess growth potential. Income is a secondary objective to be sought only
when consistent with the primary objective. The Micro-Cap Fund is a
non-diversified fund, and consequently may be more heavily weighted in fewer
stocks, and thus may be subject to greater risk. In addition, while the Manager
believes that smaller companies can provide greater growth potential than
larger, more mature firms, investing in the securities of small companies may
involve greater risks and portfolio price volatility. See "Aggressive Equity
Fund - Investment Policies and Techniques" for a description of the special
considerations and risks associated with investments in small capitalization
companies.
INVESTMENT POLICIES AND TECHNIQUES--The Micro-Cap Fund will invest under normal
market conditions at least 65% of its total assets in common stocks of
companies with market capitalizations that are less than $150 million at the
time of the initial purchase.
The Fund may also invest in investment grade convertible securities (preferred
stocks and bonds which may have either attached warrants or a conversion
privilege into common stocks). At times, when economic conditions or general
levels of common stock prices are such that the Manager deems it prudent to
adopt a temporary defensive position by reducing or curtailing investments in
common stocks, a larger proportion than usual of the Fund's assets may be
invested in preferred stocks, government securities, investment grade debt
securities, or money market instruments including, but not limited to, Treasury
Bills, certificates of deposit, eurodollars, repurchase agreements, commercial
paper and master demand notes rated in the top categories by a nationally
recognized statistical rating organization or unrated but deemed by the Manager
to be of comparable quality (which master demand notes are demand instruments
without a fixed maturity bearing interest at rates which are fixed to known
lending rates and automatically adjusted when such lending rates change) and
cash.
The Fund may invest up to 15% of its total assets at the time of purchase in
foreign securities and may also invest up to 5% of its total assets at the time
of purchase in "Special Situations." See "Aggressive Equity Fund - Investment
Policies and Techniques" for a description of investment grade debt securities
and the Manager's intention with respect to securities whose ratings are
downgraded, and the definition and risks associated with investments in foreign
securities and "Special Situations."
<PAGE> 30
PROSPECTUS 17
The Micro-Cap Fund is a non-diversified investment company. This means that the
Fund is not restricted by the provisions of the Investment Company Act of 1940
with respect to the diversification of its investments. As a matter of
fundamental policy which may not be changed without shareholder vote, however,
as to 50% of the Fund's total assets, the Fund will not purchase additional
securities of individual companies in which the Fund has invested 5% of the
Fund's total assets or has acquired more than 10% of the outstanding voting
securities of such company, measured at the time of each such investment.
Because the Fund's "non-diversified status" permits the investment of a greater
portion of the Fund's assets in the securities of individual companies than
would be permissible under a "diversified status," the Fund's "non-diversified
status" is considered to subject the Fund to a greater degree of risk.
GROWTH FUND
INVESTMENT OBJECTIVE--The primary investment objective of the Growth Fund is
long-term growth of capital through investments in a diversified portfolio of
common stock of companies believed by the Manager to possess superior growth
potential. The Fund seeks investments in companies that may have the potential
to become much larger and grow at a more consistent, but slower rate than the
companies typically in the Wasatch Aggressive Equity Fund, the Wasatch Mid-Cap
Fund and the Wasatch Micro-Cap Fund. Income is a secondary objective to be
sought only when consistent with the primary objective. The Growth Fund is
designed for the more conservative equity investor. As a further measure of
conservatism, when the market conditions warrant, the Fund will hold more cash
or other fixed income investments than the Wasatch Aggressive Equity Fund, the
Wasatch Mid-Cap Fund and the Wasatch Micro-Cap Fund.
INVESTMENT POLICIES AND TECHNIQUES--The Growth Fund will normally invest at
least 65% of its total assets in common stocks of growth companies which are
believed by the Manager to have significantly better prospects than most
companies for long-term capital appreciation based on historical and projected
rates of earnings growth or on development of new products and services.
The Fund may also invest in investment grade convertible securities (preferred
stocks and bonds which may have either attached warrants or a conversion
privilege into common stocks). At times, when economic conditions or general
levels of common stock prices are such that the Manager deems it prudent to
adopt a temporary defensive position by reducing or curtailing investments in
common stocks, a larger proportion than usual of the Fund's assets may be
invested in preferred stocks, government securities, investment grade debt
securities, or money market instruments including, but not limited to, Treasury
Bills, certificates of deposit, eurodollars, repurchase agreements, commercial
paper and master demand notes (which are demand instruments without a fixed
maturity bearing interest at rates which are fixed to known lending rates and
automatically adjusted when such lending rates change) and cash. The Fund may
invest up to 15% of its total assets at the time of purchase in foreign
securities and may also
<PAGE> 31
18 PROSPECTUS
invest up to 5% of its total assets at the time of purchase in "Special
Situations." See "Aggressive Equity Fund--Investment Policies and Techniques"
for a description of investment grade securities and the Manager's intention
with respect to securities whose ratings are downgraded, and the definition and
risks associated with investments in foreign securities and "Special
Situations." A portion of the Fund's assets may be invested in the securities of
small companies. See "Aggressive Equity Fund--Investment Policies and
Techniques" for a description of the special considerations and risks associated
with investments in small capitalization companies.
Although the Fund is a diversified investment company, 25% of the total asset
value of the Fund is not subject to the diversification policy. Because this
policy permits the investment of more than 5% of the Fund's total assets at the
time of purchase in a single security, the Fund is subject to a greater degree
of risk.
MID-CAP FUND
INVESTMENT OBJECTIVE--The primary investment objective of the Mid-Cap Fund is
long-term growth of capital through investments in a portfolio of common stock
of mid-sized companies believed by the Manager to possess superior growth
potential based on historical and projected rates of earnings growth or on
development of new products and services. Income is a secondary objective to be
sought only when consistent with the primary objective. The Mid-Cap Fund seeks
investments in companies which the Manager believes may grow generally at a
rate of earnings growth higher than the companies in the portfolios of the
Wasatch Aggressive Equity Fund, the Wasatch Growth Fund and the Wasatch
Micro-Cap Fund and, therefore, may experience greater short-term price
volatility. These anticipated higher growth rates may cause the Wasatch Mid-Cap
Fund to be more volatile than the other Wasatch Funds and therefore, investors
should consider an investment in the Mid-Cap Fund to be subject to more risk
and greater volatility than the other Wasatch Funds.
INVESTMENT POLICIES AND TECHNIQUES--The Mid-Cap Fund will invest at least 65%
of its total assets in common stock of companies whose market capitalization is
between $300 million and $5 billion at the time of purchase, which are believed
by the Manager to have significantly better prospects than most companies for
long-term capital appreciation based on historical and projected rates of
earnings growth or on development of new products and services.
The Fund may also invest in investment grade convertible securities (preferred
stocks and bonds which may have either attached warrants or a conversion
privilege into common stocks). The Fund may invest in preferred stocks,
government securities, investment grade debt securities or money market
instruments including, but not limited to, Treasury Bills, certificates of
deposit, eurodollars, repurchase agreements, commercial paper and master demand
notes (which are demand instruments without a fixed maturity bearing interest
at rates which are fixed to known lending rates and automatically adjusted when
<PAGE> 32
PROSPECTUS 19
such lending rates change) and cash. At times, when economic conditions or
general levels of common stock prices are such that the Manager deems it
prudent to adopt a temporary defensive position by reducing or curtailing
investments in common stocks, a larger proportion than usual of the Fund's
assets may be invested in preferred stocks, government securities, investment
grade debt securities, or money market instruments (as described above) and
cash. The Fund may invest up to 15% of its total assets at the time of purchase
in foreign securities and may also invest up to 5% of its total assets at the
time of purchase in "Special Situations." See "Aggressive Equity Fund -
Investment Policies and Techniques" for a description of investment grade
securities and the Manager's intention with respect to securities whose ratings
are downgraded, and the definition and risks associated with investments in
foreign securities and "Special Situations." It should be noted that companies
in which the Fund may invest may have limited product lines, markets, or
financial resources, or may be dependent upon a small management group, and
their securities may be subject to more abrupt or erratic market movements than
larger, more established companies, both because their securities typically are
traded in lower volume and because the issuers typically are subject to a
greater degree to changes in their earnings and prospects. See "Aggressive
Equity Fund - Investment Policies and Techniques" for an additional discussion
of risks associated with investments in companies with smaller market
capitalizations.
The Mid-Cap Fund is a non-diversified investment company. This means that the
Fund is not restricted by the provisions of the Investment Company Act of 1940
with respect to the diversification of its investments. As a matter of
fundamental policy which may not be changed without shareholder vote, however,
as to 75% of the Fund's total assets, the Fund will not purchase additional
securities of any one individual company if immediately after and as a result
of such investment the Fund owns more than 10% of any class of securities of
such company. In addition, though not a fundamental policy, as to 50% of the
Fund's total assets, the Fund will not purchase additional securities of any
one individual company if immediately after and as a result of such investment
more than 5% of the Fund's total assets would be invested in the securities of
such company, or the Fund owns more than 10% of the outstanding voting
securities of such company. Because the Fund's "non-diversified status" permits
the investment of a greater portion of the Fund's assets in the securities of
individual companies than would be permissible under a "diversified status,"
the Fund's "non-diversified status" is considered to subject the Fund to a
greater degree of risk.
INCOME FUND
INVESTMENT OBJECTIVE--The Income Fund's primary investment objective is to
receive current income at low risk by investing in fixed income securities. The
secondary objective is capital appreciation. The Manager may adjust the average
maturity of the Fund's portfolio from time to time, depending on its assessment
of the relative yields available on securities of different maturities and its
assessment of future interest rate patterns. The Fund is not limited as to the
maturities of its portfolio
<PAGE> 33
20 PROSPECTUS
investments, and to the extent consistent with its investment objective, may
take full advantage of the entire range of maturities offered. However, under
normal market conditions, the Fund anticipates it will maintain a dollar
weighted average portfolio maturity of three years or less. The Fund can
invest in investment grade fixed income securities, including securities of
the United States government and its agencies, corporate bonds and notes,
convertible securities, preferred stocks, short-term securities, money market
instruments and cash.
INVESTMENT POLICIES AND TECHNIQUES--The Income Fund seeks to achieve its
investment objectives by investing in investment grade fixed income securities,
including securities of the United States government and its agencies and
instrumentalities, corporate bonds and notes, convertible securities, preferred
stocks, short-term securities, money market instruments and cash. See
"Aggressive Equity Fund --Investment Policies and Techniques" for a description
of investment grade securities and the Manager's intention with respect to
securities where ratings are downgraded.
Securities issued or guaranteed by the U.S. government or its agencies include
a variety of Treasury securities which differ in their interest rates,
maturities and times of issuance. Some obligations issued or guaranteed by U.S.
government agencies and instrumentalities, such as Government National Mortgage
Association (GNMA) pass-through certificates, are supported by the full faith
and credit of the U.S. Treasury; others, such as those of the Federal Home Loan
Bank, by the right of the issuer to borrow from the Treasury; others, such as
those issued by the Federal National Mortgage Association, by discretionary
authority of the U.S. government to purchase certain obligations of the agency
or instrumentality; and others, such as those issued by the Student Loan
Marketing Association, only by the credit of the agency or instrumentality.
While the U.S. government provides financial support to such U.S.
government-sponsored agencies or instrumentalities, no assurance can be given
that it always will do so since it is not so obligated by law.
Even though some interest-bearing securities are investments which offer a
stable stream of income at relatively high current yields, the prices of such
securities are affected by changes in interest rates and are therefore subject
to market price fluctuations. The value of fixed income securities varies
inversely with changes in market interest rates. When interest rates rise, the
value of the Fund's portfolio securities, and therefore its net asset value per
share, generally will decline.
GNMA pass-through certificates may be less effective than other types of U.S.
government securities as a means of locking in attractive long-term interest
rates due to the need to reinvest prepayments of principal generally and the
possibility of significant unscheduled prepayments resulting from declines in
mortgage interest rates. GNMA certificates may also have less potential for
capital appreciation than other investments of comparable maturities due to the
likelihood of increased prepayments of mortgages as
<PAGE> 34
PROSPECTUS 21
interest rates decline, while having comparable risk of decline in value
during periods of rising rates.
To the extent they are purchased at par or at a discount, GNMA certificates
offer a high degree of safety of principal investment because of the GNMA
guarantee. If the Fund buys GNMA certificates or other government
mortgage-backed securities at a premium, however, mortgage foreclosures and
unscheduled principal prepayments may result in some loss of the Fund's
principal investment to the extent of the premium paid.
The values of fixed income securities also may be affected by changes in the
credit rating or financial condition of the issuing entities.
Not only does the Manager seek to limit risk by investing in investment grade
securities but also by adjusting the maturity of the portfolio. The Fund is not
limited as to the maturities of its portfolio investments and may take full
advantage of the entire range of maturities offered. The Manager may adjust the
average maturity of the Fund's portfolio from time to time, depending on its
assessment of the relative yields available on securities of different
maturities and its assessment of future interest rate patterns. The rate of
turnover in the Fund will depend on interest rate volatility. During periods of
high interest rate volatility, it is likely that the Fund will experience a
high rate of turnover. If the Manager forecasts that interest rates will not
increase substantially, turnover is lower and the average maturity of the
portfolio may exceed ten years. If the Manager forecasts a substantial increase
in interest rates, a temporary defensive policy may be more appropriate, and
the Manager may deem it prudent to reduce the average maturity of the portfolio
to less than one year. As a general matter, instruments having a longer
remaining maturity tend to fluctuate more in market value than instruments
having a shorter maturity for a given change in yield. Consequently, the Fund's
net asset value will tend to fluctuate more at times when the average maturity
of its portfolio is longer. While such portfolio adjustments may require the
sale of securities prior to their maturity date, the goal of such transactions
will be either to increase income and/or to limit risk rather than to obtain
trading profits.
Although the Income Fund is a diversified investment company, 25% of the total
asset value of the Fund is not subject to the diversification policy. Because
this policy permits the investment of more than 5% of the Fund's total assets
at the time of purchase in a single security, the Fund is subject to a greater
degree of risk.
PORTFOLIO TURNOVER
The portfolio turnover rate for a Fund is calculated by dividing the lesser of
purchases or sales by such Fund of investment securities for the particular
fiscal year by the monthly average value of investment securities owned by the
Fund during the same fiscal year.
<PAGE> 35
22 PROSPECTUS
"Investment securities" for the purposes of this calculation do not include
securities with a maturity date less than 12 months from the date of investment.
The rate of portfolio turnover will not be a limiting factor when the Manager
deems changes in the Aggressive Equity, Micro-Cap, Growth, Mid-Cap and Income
Funds' portfolios appropriate in view of each Fund's investment objectives. As
a result, while the Funds will not purchase or sell securities solely to
achieve short-term trading profits, the Funds may sell portfolio securities
without regard to the length of time they have been held if continuing to hold
them is no longer consistent with the Funds' investment objectives. High
turnover (over 100%) in any year will result in the payment by the Funds of
above-average amounts of transaction-related charges and could result in the
payment by shareholders of above-average amounts of taxes on realized
investment gains.
Although a Fund cannot accurately predict its annual portfolio turnover rate,
the Manager expects that, under normal circumstances, the annual portfolio
turnover rate of the Micro-Cap Fund will not exceed 100%, but may be as high
as 150%. The current portfolio turnover rates for the Aggressive Equity,
Micro-Cap, Growth, Mid-Cap and Income Funds are set forth in the Prospectus.
These rates should not be considered as limiting factors.
MANAGEMENT OF THE COMPANY
Wasatch Funds is a management investment company incorporated in Utah on
November 18, 1986 and presently consists of five separate Funds. Wasatch Funds
changed its name to Wasatch Funds, Inc. from Wasatch Advisors Funds, Inc. in
January 1996. The Growth Fund and Income Fund are each open-end diversified
management investment companies, and the Aggressive Equity Fund, Micro-Cap Fund
and Mid-Cap Fund are open-end non-diversified management investment companies.
The Manager, Wasatch Advisors, Inc., retains proprietary rights to the
Company's name.
The business and affairs of Wasatch Funds are subject to the supervision of its
Board of Directors. The Board consists of five directors who are elected each
year and serve for one-year terms and/or until their successors are elected and
qualified.
The Manager determines the investment of the Funds' assets, provides certain
administrative services and manages the Funds' business and affairs. The
Manager has been in the investment advisory business since 1975 and currently
has assets under management of approximately $924 million. Dr. Samuel S.
Stewart, Jr. is President and a Director of the Funds and also Chairman of the
Board and President of the Manager. Dr. Stewart is the only owner of the
Manager who owns more than 25% of the Manager and is thus deemed to control the
Manager. All interested directors of the Company are also officers and
directors of the Manager.
<PAGE> 36
PROSPECTUS 23
Samuel S. Stewart, Jr., Ph.D., is the portfolio manager of the Income Fund and
as such is responsible for the day-to-day management of the Income Fund's
portfolio. Dr. Stewart is the President of the Manager and has served in such
capacity since 1975 when he founded the Manager. Dr. Stewart also serves as
lead manager for the portfolio of the Aggressive Equity Fund and serves as
Co-Manager with Jeff Cardon on the Growth Fund, Co-Manager with Karey Barker on
the Mid-Cap Fund, and Co-Manager with Robert Gardiner on the Micro-Cap Fund.
While the portfolios of the Micro-Cap Fund, Growth Fund and Mid-Cap Fund are
co-managed, a committee comprised of Dr. Stewart, Jeff Cardon, Karey Barker,
Robert Gardiner, Mark Bailey and Roy Jespersen, all of whom are Chartered
Financial Analysts except Mr. Jespersen who has an MBA, also makes
recommendations to the Funds. Mr. Cardon joined the Manager in 1980 and serves
as Vice-President and Senior Research Analyst. Ms. Barker and Mr. Gardiner have
served as research analysts for the Manager since 1989 and 1990, respectively.
Mr. Bailey and Mr. Jespersen joined the Manager in 1981 and 1983, respectively,
and serve as Vice-Presidents.
The Manager has offices at 68 South Main Street, Salt Lake City, UT 84101,
which also houses the offices of Wasatch Funds.
ADVISORY AND OTHER AGREEMENTS
The Company retains the Manager to manage the investment of its assets and to
place orders for the purchases and sales of its portfolio securities. Under
investment advisory and service contracts, the Aggressive Equity and Growth
Funds pay the Manager a monthly fee computed on average daily net assets of
each Fund at the annual rate of 1.0%. The Mid-Cap Fund pays the Manager at the
annual rate of 1.25%. The Micro-Cap Fund pays the Manager at the annual rate of
2.0%. Such annual rates are higher than the rates paid by most registered
investment companies. The Income Fund pays the Manager a monthly fee computed
on average daily net assets of the Fund at the annual rate of 1/2 of 1.0%.
The Manager is responsible for the placement of orders for the purchase and
sale of portfolio securities for the Fund and the negotiation of brokerage
commissions on such transactions. Brokerage firms are selected on the basis of
their professional capability for the type of transaction and the value and
quality of execution services rendered on a continuing basis. The Manager is
authorized to place portfolio transactions with brokerage firms participating
in the distribution of shares of the Funds if it reasonably believes that the
quality of the execution and the commission are comparable to that available
from other qualified brokerage firms. The Manager is authorized to pay higher
commissions to brokerage firms that provide it with investment and research
information than to firms which do not provide such services if the Manager
determines that such commissions are reasonable in relation to the overall
services provided. The information received may be used by the Manager in
managing the assets of other advisory accounts as well as in the management of
the assets of the Funds.
<PAGE> 37
24 PROSPECTUS
Pursuant to Administration and Fund Accounting Agreements (the "Administration
Agreements"), Sunstone Financial Group, Inc. (the "Administrator"), 207 East
Buffalo Street, Suite 400, Milwaukee, WI 53202-5712, calculates daily net asset
values of each Fund, oversees the Funds' Custodian and Transfer Agent, prepares
and files all federal and state tax returns and required tax filings (other
than those required to be made by the Funds' Custodian or the Transfer Agent),
oversees the Funds' insurance relationships, participates in the preparation of
the Funds' registration statement, proxy statements and reports, prepares
compliance filings pursuant to state securities laws, compiles data for and
prepares notices to the Securities and Exchange Commission, prepares financial
statements for the annual and semi-annual reports to the Securities and
Exchange Commission and current investors, monitors the Funds' expense
accounts, monitors the Funds' status as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"),
monitors compliance with the Funds' investment policies and restrictions and
generally assists in the Funds' administrative operations. The Administrator,
at its own expense and without reimbursement from the Funds, furnishes office
space and all necessary office facilities, equipment, supplies and clerical and
executive personnel for performing the services required to be performed by it
under the Administration Agreements. For the foregoing, the Administrator
receives a fee on the combined value of the Funds, computed daily and payable
monthly, at the annual rate of twenty-eight one-hundredths of one percent
(0.28%) on the first $50 million of the average daily net assets, eighteen
one-hundredths of one percent (0.18%) on the next $50 million of the average
daily net assets and thirteen one-hundredths of one percent (0.13%) on the
average daily net assets in excess of $100 million, subject to the following
minimum fees: Aggressive Equity Fund ($75,000); Mid-Cap Fund ($75,000); Growth
Fund ($40,000); Micro-Cap Fund ($17,500); and Income Fund ($4,000).
Sunstone Financial Group, Inc. acts as Transfer Agent for the Funds (the
"Transfer Agent"). UMB Bank, n.a. acts as Custodian of the assets of the Funds.
The Company, on behalf of each of the Funds, has also entered into service
agreements with various brokerage firms pursuant to which the brokers provide
certain administrative services with respect to their customers who are
beneficial owners of shares of the Funds. Pursuant to these service agreements,
the Funds compensate the brokers for the administrative services provided which
compensation is based on the aggregate assets of their customers that are
invested in the Funds.
EXPENSES
The Funds pay all of their own expenses, including, without limitation, the
cost of preparing and printing their registration statements required under the
Securities Act of 1933 and the Investment Company Act of 1940 and any
amendments thereto, the expense of registering their shares with the Securities
and Exchange Commission and in the various states, the printing and
distribution costs of prospectuses mailed to existing investors, reports to
investors, reports to government authorities and proxy statements, fees paid to
Directors who are not interested persons (as defined in the Investment
<PAGE> 38
PROSPECTUS 25
Company Act of 1940), interest charges, taxes, legal expenses, association
membership dues, auditing services, insurance premiums, brokerage commissions
and expenses in connection with Fund transactions, fees and expenses of the
Custodian of the Funds' assets, printing and mailing expenses, charges and
expenses of dividend disbursing agents, accounting services agents, registrars
and stock transfer agents, travel expenses, salaries and related compensation
of all non-officer employees, and extraordinary and nonrecurring expenses.
The advisory and service contracts provide that the Manager shall reimburse the
Funds if Fund expenses excluding interest, taxes, extraordinary expenses,
brokerage commissions and transactions costs exceed those set forth in any
statutory or regulatory formula prescribed by any state in which Fund shares
are registered at such time. The Manager has voluntarily agreed to limit the
expenses of the Micro-Cap Fund to 2.50%, the expenses of the Aggressive Equity
and Growth Funds to 1.50%, the expenses of the Mid-Cap Fund to 1.75% and the
expenses of the Income Fund to 1.0% of average net assets computed on a daily
basis and will pay all expenses excluding interest, taxes, extraordinary
expenses, brokerage commissions and transactions costs in excess of such
limitations. For the year ended September 30, 1995, the Manager reimbursed the
Aggressive Equity Fund $0; the Growth Fund $16,636; the Mid-Cap Fund $35,750;
the Income Fund $19,946; and the Micro-Cap Fund $23,438, respectively. The
Manager may rescind these voluntary limitations on expenses at any time.
ORGANIZATION OF THE COMPANY
The Company is comprised of five separate series, each of which consists of a
separate portfolio or fund which issues a separate class of shares. The Board
of Directors is authorized to create new funds in addition to those already
existing without the approval of the shareholders of the Company. All shares
have equal voting rights; each share is entitled to one vote per share (with
proportionate voting for fractional shares), except that only shares of the
respective series are entitled to vote on matters concerning only that series.
The assets received by the Company upon the sale of shares of each Fund and all
income, earnings, profits and proceeds thereof, subject only to the rights of
creditors, are specifically allocated to such Fund. They constitute the
underlying assets of each Fund, are required to be segregated on the books of
account, and are to be charged with the expenses of such Fund. Any general
expenses of the Company not readily identifiable as belonging to a particular
Fund will be allocated on the basis of each Fund's relative net assets during
the fiscal year.
Each share of a series of the Company has equal dividend, distribution,
liquidation and voting rights with other shares of that series. Each issued and
outstanding share of a series is entitled to one vote and to participate
equally in dividends and distributions
<PAGE> 39
PROSPECTUS 26
declared by the Fund out of that series and upon liquidation or dissolution of
the series in the net assets remaining after satisfaction of outstanding
liabilities.
The shares of each Fund, when issued, will be fully paid and non-assessable,
have no preference, preemptive, conversion, exchange or similar rights, and
will be freely transferable.
PURCHASE OF SHARES
Shares of the Funds are sold on a continuous basis at the net asset value next
determined after receipt of a New Account Application by the Funds. The Board
of Directors of the Funds has established $2,000 as the minimum initial
purchase and $100 as the minimum for any subsequent purchase. The minimum
purchase requirements do not apply to reinvested dividends or investments
pursuant to an Automatic Investment Plan or Individual Retirement Account.
INITIAL INVESTMENT (MINIMUM $2,000)
New Account Applications may be obtained from the Funds. Completed applications
should be mailed directly to: Wasatch Funds, P.O. Box 2172, Milwaukee, WI
53201-2172. All applications must be accompanied by payment in the form of a
check made payable to Wasatch Funds. All purchases must be made in U.S. dollars
and checks must be drawn on U.S. banks. No cash will be accepted. The Funds
will charge a $15 fee against an investor's account for any payment check
returned for insufficient funds. The investor will also be responsible for any
losses suffered by the Funds as a result. When a purchase is made by check and
a redemption is made shortly thereafter, the Funds may delay the mailing of a
redemption check until it is satisfied that the check used to purchase Fund
shares has cleared.
To avoid redemption delays, purchases may be made by direct wire transfers. The
establishment of a new account by wire transfer should be preceded by a
telephone call to the Funds at 1-800-551-1700. The investor will be asked to
provide his or her name, address, Social Security or Tax Identification Number,
the name of the Fund, the amount of his or her investment and the name and
address of the bank that will be wiring the investment. The Funds will inform
the investor of his or her assigned investor account number at that time. Funds
should be wired through the Federal Reserve System as follows:
<PAGE> 40
PROSPECTUS 27
UMB Bank, n.a.
A.B.A. Number 101000695
For credit to Wasatch Funds
Account Number 987-060-9800
For further credit to:
(investor account number)
(name or account registration)
(Social Security or Tax Identification Number)
(Identify which account to purchase)
You must promptly complete a New Account Application and mail it to the Funds
at the following address: Wasatch Funds, P.O. Box 2172, Milwaukee, WI
53202-2172. If you wish to send it via overnight delivery, you may send it to:
Wasatch Funds, 207 East Buffalo Street, Suite 315, Milwaukee, WI 53202-5712.
Shares will not be redeemed until the Funds receive a properly completed and
executed New Account Application. The Funds reserve the right to refuse a
telephone transaction if they believe it advisable to do so.
Inquiries concerning the Funds or the New Account Application may be directed
to the Funds. For telephone assistance, call 1-800-551-1700.
SUBSEQUENT INVESTMENTS (MINIMUM $100)
Additions to an investor's account may be made by mail or by wire ($100
minimum). When adding to an account by mail, the investor should send to the
Funds his or her remittance, together with the detachable form sent with the
most recent statement from the Funds. If this form is unavailable, the investor
should send a note giving the full name of the account and the account number.
For additional investments made by wire transfer, the investor should use the
wiring instructions mentioned above. The investor should notify the Funds at
1-800-551-1700 prior to wiring funds. The required minimum investments are
waived in the case of reinvestment of dividends and distributions and may be
waived for plans involving automatic periodic investments.
GENERAL INFORMATION
All applications to purchase Fund shares are subject to acceptance by the Funds
and are not binding until so accepted. The Funds do not, except as indicated in
the following sentence, accept telephone orders for the purchase of shares and
reserve the right to reject applications in whole or in part. The Funds may
accept telephone orders from broker/dealers who have been previously approved
by the Funds. It is the responsibility of such broker/dealers promptly to
forward purchase or redemption orders to the Funds. Although there is no sales
charge levied directly by the Funds, broker/dealers may charge the investor a
transaction-based fee or other fee for their services. Such charges may vary
among broker/dealers but in all cases will be retained by the broker/dealer and
not remitted to the Funds or the Manager.
<PAGE> 41
28 PROSPECTUS
In order to relieve the investor of responsibility for safekeeping and
delivery of stock certificates, the Funds will not issue certificates as of
February 1, 1996. Instead, shares purchased are automatically credited to an
account maintained for the investor on the books of the Funds. The investor
will receive a statement showing the details of each transaction.
The Aggressive Equity Fund is currently closed to new investors. Shareholders
of the Aggressive Equity Fund as of the July 15, 1995 closing date may continue
to add to an account through the reinvestment of dividends and cash
distributions on any Aggressive Equity Fund shares owned and through the
purchase of additional Aggressive Equity Fund shares. Shareholders of the
Aggressive Equity Fund as of the July 15, 1995 closing date may also open and
add to additional Aggressive Equity Fund accounts that use the same Social
Security Number as the account existing as of July 15, 1995 such as accounts
where the shareholder is the owner, a joint owner or a custodian for a minor
child. Shares of the Fund may continue to be purchased through financial
planners whose clients beneficially own in the aggregate existing Aggressive
Equity Fund accounts in excess of $1 million as of July 15, 1995. Additionally,
Directors of the Fund and employees and directors of the Fund's Manager may
continue to open new Fund accounts. The Fund may resume sales to new investors
at some future date, but it has no present intention to do so.
AUTOMATIC INVESTMENT PLAN
The Funds offer an Automatic Investment Plan in which an investor may
automatically make purchases of shares of the Funds on a regular, convenient
basis ($50 minimum per transaction monthly/$100 quarterly). Under the Automatic
Investment Plan, an investor's designated bank or other financial institution
debits a preauthorized amount on the investor's account each month and applies
the amount to the purchase of Fund shares. The Automatic Investment Plan must
be implemented with a financial institution that is a member of the Automated
Clearing House ("ACH"). No service fee is currently charged by the Funds for
participating in the Automatic Investment Plan. A $15 fee will be imposed by
the Funds if sufficient funds are not available in the investor's account at
the time of the automatic transaction. Applications to establish the Automatic
Investment Plan are available from the Funds. A $1,000 minimum initial
investment must be met before the Automatic Investment Plan may be established.
RETIREMENT PLANS
IRA PLAN--Individuals who receive compensation or earned income, even if they
are active participants in a qualified retirement plan (or certain similar
retirement plans), may establish their own tax-sheltered Individual Retirement
Account ("IRA"). The Funds offer a prototype IRA plan which may be adopted by
individuals. There is currently no charge for establishing an account, although
there is an annual maintenance fee. A $1,000 minimum initial investment ($250
for a spousal IRA) is required.
<PAGE> 42
PROSPECTUS 29
Earnings on amounts held in an IRA are not taxed until withdrawn. However, the
amount of deduction, if any, allowed for IRA contributions is limited for
individuals who are active participants in an employer-maintained retirement
plan and whose incomes exceed specific limits.
A description of applicable service fees and certain limitations on
contributions and withdrawals, as well as an application form, are available
from the Funds upon request. The IRA kit contains a Disclosure Statement which
the Internal Revenue Service requires to be furnished to individuals who are
considering adopting the IRA. Premature withdrawals from an IRA will result in
adverse tax consequences. Consultation with a competent financial and tax
adviser is recommended.
SECTION 403(B)(7) PLAN--The Funds also offer a tax-sheltered custodial account
designed to qualify under Section 403(b)(7) of the Internal Revenue Code which
is available for use by employees of certain educational, non-profit, hospital
and charitable organizations.
A complete description of the Plans, as well as a description of the various
applicable service fees, are available from the Funds upon request.
EXCHANGE PRIVILEGE
Shares of any Wasatch Fund may be exchanged for shares of another Wasatch Fund
at any time. This exchange offer is available only in states where shares of
such other Fund may be legally sold. Each exchange is subject to the minimum
initial investment required for each Fund. You may make additional exchanges
for $500 or more. You may open a new account or purchase additional shares by
making an exchange from an existing Wasatch Fund account. New accounts will
have the same registration as the existing accounts. Exchanges may be made
either in writing or by telephone. To exchange by telephone, you must follow
the instructions below under "How to Redeem by Telephone." Exchanges for shares
in the Aggressive Equity Fund may only be made by shareholders with an existing
Aggressive Equity Fund account.
In addition to the ability to exchange among Wasatch Funds, shareholders may
exchange all or a portion of their investment from the Wasatch Funds to the
Northern U.S. Government Money Market Fund (the "U.S. Government Money Market
Fund"). This expanded exchange feature is subject to the minimum purchase and
redemption amounts set forth in this Prospectus ($2,000 minimum, $100
subsequent). You must obtain a copy of the U.S. Government Money Market Fund
prospectus from the Funds, and you are advised to read it carefully, before
authorizing any investment in shares of the U.S. Government Money Market Fund.
<PAGE> 43
30 PROSPECTUS
Exchange requests may be subject to other limitations, including those relating
to frequency, that may be established from time to time to ensure that the
exchanges do not disadvantage the Funds or their investors. Investors will be
notified at least 60 days in advance of any changes in such limitations and may
obtain the terms of any such limitation by writing to: Wasatch Funds, P.O. Box
2172, Milwaukee, WI 53201-2172. The Funds currently limit exchanges to four per
year.
There is no fee for a written exchange request. The responsibility of the Funds
and their Transfer Agent for the authenticity of telephone exchange
transactions may be limited as described under "Redemption of Shares."
Exchanges into the Aggressive Equity Fund from other Wasatch Funds or from the
U.S. Government Money Market Fund are permitted only for shareholders with an
existing Aggressive Equity Fund account.
The Funds also allow investors to make regular automatic monthly investments in
an existing account in the Aggressive Equity Fund, Micro-Cap Fund, Growth Fund,
Mid-Cap Fund or Income Fund by redemption of shares from their U.S. Government
Money Market Fund. There is no fee charged for this service. These transactions
must meet the minimum purchase amounts described. Any changes to the automatic
exchange must be made prior to the end of the preceding month to be effective
in the current month. Please call the Funds at 1-800-551-1700 for an
application form.
An exchange involves a redemption of all or a portion of the shares in a Fund
and the investment of the redemption proceeds in shares of another of the Funds
or the U.S. Government Money Market Fund. For exchanges between Wasatch Funds,
the value to be exchanged and the price of the shares being purchased will be
the new net asset value next determined by the Funds after receipt and
acceptance of proper instructions for the exchange. If you desire to use the
expanded exchange privilege, you should contact the Funds at 1-800-551-1700 for
further information about the procedures and the effective time for exchanges.
You should note that requests for an exchange from a Fund to the U.S.
Government Money Market Fund must be received and accepted by the Funds by 3:00
p.m. Central time on a day during which the Fund's net asset value is
determined in order to permit the investment of exchange proceeds into the U.S.
Government Money Market Fund the next day the net asset value of the U.S.
Government Money Market Fund is determined. Requests for an exchange from the
U.S. Government Money Market Fund to a Fund must be received by the Funds prior
to 12:30 p.m. Central time in order to permit the redemption of the U.S.
Government Money Market Fund and the investment of the exchange proceeds into
the Fund the day the exchange request is accepted. Otherwise, both the
redemption from the U.S. Government Money Market Fund and the purchase of the
Fund will occur the next day the respective net asset values are determined. An
exchange from one Fund to another or to the U.S. Government Money Market Fund
is treated the same as an ordinary sale and purchase for federal income tax
purposes.
<PAGE> 44
PROSPECTUS 31
For federal income tax purposes, an exchange of shares is a taxable event and,
accordingly, the investor may realize a capital gain or loss. Before making an
exchange request, the investor should consult a tax or other financial adviser
to determine the tax consequences of a particular exchange.
If you buy shares by check, you may not exchange those shares for up to ten
calendar days to ensure your check has cleared. If you intend to exchange
shares soon after their purchase, you should purchase shares by wire or contact
the Funds at 1-800-551-1700.
Additional documentation may be required for exchange requests if shares are
registered in the name of a corporation, partnership or fiduciary. Contact the
Funds for additional information concerning the exchange privilege.
REDEMPTION OF SHARES
Investors may request redemption of part or all of their shares in a Fund
whenever they wish. For most redemption requests, an investor need only deliver
to the Funds a written, unconditional request to redeem his or her shares at
net asset value. A request for redemption must be signed exactly as the shares
are registered, including the signature of each joint owner, and must specify
the Fund and either the number of shares or the dollar amount of shares that
are to be redeemed. If stock certificates have been issued, the investor must
also deliver the certificate or certificates in transferable form, duly
endorsed or accompanied by a separate stock power. In certain situations, such
as where corporations, executors, administrators, trustees and guardians are
involved, additional documentation and signature guarantees may be required.
Redemptions are effected only by the Funds. In case of any questions concerning
the nature of such additional requirements, the Funds should be contacted in
advance by calling 1-800-551-1700.
Redemption requests may be submitted directly to the Funds at no cost to the
investor. They may also be submitted through broker/dealers, in which case a
service fee may be charged by such broker/dealer. If shares are purchased
through a broker/dealer and are held in the name of the broker/dealer,
redemption requests will only be accepted by the Funds if made by the
broker/dealer. If a redemption request is not sent directly to the Funds, it
will be forwarded to the Funds, and the effective date of redemption will be
delayed until the request is received by the Funds. THUS, TO AVOID DELAY,
PLEASE SUBMIT REDEMPTION REQUESTS DIRECTLY TO THE FUNDS.
Except in certain situations, such as where corporations, executors,
administrators, trustees and guardians are involved, signatures need not be
guaranteed unless (a) the redemption request exceeds $25,000, or (b) the
proceeds of the redemption are requested to be sent by wire transfer to a
person other than the registered holder or holders of the shares to be redeemed
or to be mailed to other than the address of record. In such cases,
<PAGE> 45
32 PROSPECTUS
each signature on any stock certificate, stock power or redemption request must
be guaranteed by a commercial bank or trust company in the United States, a
member firm of the Exchange or other eligible guarantor institution.
The redemption price per share is the next determined net asset value per Fund
share after receipt by the Funds of the written request containing the
information set forth above, accompanied by all required documentation. The
amount received will depend on the market value of the investments in the
Fund's portfolio at the time of determination of net asset value and may be
more or less than the cost of the shares redeemed. A check in payment for
shares redeemed will be mailed to the holder typically within one or two days,
but no later than the seventh day after receipt of the redemption request in
proper form and of all required documentation (except as indicated below for
certain redemptions of shares purchased by check).
Investors may redeem Fund shares by telephone. To redeem shares by telephone,
an investor must check the appropriate box on the New Account Application. Once
this feature has been requested, shares may be redeemed by phoning the Funds at
1-800-551-1700 and giving the Fund name, account number and either the number
of shares or the dollar amount to be redeemed. Proceeds redeemed by telephone
will be mailed or wired only to an investor's address or bank of record as
shown on the Funds' records. Telephone redemptions must be in amounts of $1,000
or more, not exceeding $50,000. This maximum amount may be waived for
broker/dealers.
Payment of the redemption proceeds for Fund shares redeemed by telephone where
an investor requests wire payment will normally be made in federal funds on the
next business day. As stated above, the Funds will wire redemption proceeds
only to the bank and account designated on the New Account Application or in
written instructions subsequently received by the Funds, and only if the bank
is a commercial bank located within the United States. The Funds currently
charge a $7.50 fee for each payment made by wire of redemption proceeds, which
fee will be deducted from the investor's account.
In order to arrange for telephone redemptions after a Fund account has been
opened or to change the bank, account or address designated to receive
redemption proceeds, a written request must be sent to the Funds. The request
must be signed by each registered holder of the account with the signatures
guaranteed by a commercial bank or trust company in the United States, a member
firm of the Exchange or other eligible guarantor institution. Further
documentation may be requested from corporations, executors, administrators,
trustees and guardians.
The Funds reserve the right to refuse a telephone redemption if it is believed
advisable to do so. Procedures for redeeming Fund shares by telephone may be
modified or terminated by the Funds at any time. In an effort to prevent
unauthorized or fraudulent
<PAGE> 46
PROSPECTUS 33
redemption or exchange requests by telephone, the Funds and the Transfer Agent
have implemented procedures designed to reasonably assure that telephone
instructions are genuine. These procedures include requesting verification of
various pieces of personal information, recording telephone transactions,
confirming transactions in writing and restricting transmittal of redemption
proceeds to pre-authorized designations. Other procedures may be implemented
from time to time. If reasonable procedures are not implemented, the Funds
and/or the Transfer Agent may be liable for any loss due to unauthorized or
fraudulent transactions. In all other cases, the shareholder is liable for any
loss for unauthorized transactions. Investors should be aware that during
periods of substantial economic or market change, telephone or wire redemptions
may be difficult to implement. If an investor is unable to contact the Funds by
telephone, shares may also be redeemed by delivering the redemption request to
the Funds by mail as described above.
The Funds will mail payment for redemption within seven days after it receives
proper instructions for redemption. However, the Funds will delay payment for
ten calendar days on redemptions of recent purchases made by check. This allows
the Funds to verify that the check will not be returned due to insufficient
funds and is intended to protect the remaining investors from loss.
To relieve the Funds of the cost of maintaining uneconomical accounts, the
Funds reserve the right to redeem the shares held in any account if, at the
time of any redemption of shares in the account, the net asset value of the
remaining shares in the account falls below $500. Before such involuntary
redemption would occur, the investor would be given at least 60 days' written
notice and, during that period, the investor could make an additional
investment to restore the account to at least the minimum amount, in which case
there would be no such redemption. Involuntary redemptions will not be made
because the value of shares in an account falls below the minimum amount solely
because of a decline in a Fund's net asset value. Any such involuntary
redemption would be at net asset value.
The right to redeem Fund shares will be suspended for any period during which
the Exchange is closed because of financial conditions or any other
extraordinary reason and may be suspended for any period during which (a)
trading on the Exchange is restricted pursuant to rules and regulations of the
Securities and Exchange Commission, (b) the Securities and Exchange Commission
has by order permitted such suspension, or (c) an emergency, as defined by
rules and regulations of the Securities and Exchange Commission, exists as a
result of which it is not reasonably practicable for the Funds to dispose of
portfolio securities or fairly to determine the net asset value.
For further information on the right to redeem Fund shares, see the section of
the Statement of Additional Information entitled "Purchase, Redemption and
Pricing of Securities Being Offered."
<PAGE> 47
34 PROSPECTUS
SYSTEMATIC WITHDRAWAL PLAN
As another convenience for its shareholders, the Funds offer a Systematic
Withdrawal Plan whereby investors may request that a check drawn in a
predetermined amount be sent to them each month. An investor's account must own
shares in a Fund worth at least $5,000 in order to start a Systematic
Withdrawal Plan with respect to such Fund, and the minimum amount that may be
withdrawn monthly under the plan is $50. Currently there is no separate charge
to an investor for this plan. The Systematic Withdrawal Plan may be terminated
at any time without charge or penalty, and the Funds reserve the right to
terminate or modify the Systematic Withdrawal Plan upon 60 days' written notice
to each investor prior to the modification or termination taking effect.
Withdrawals involve redemption of Fund shares and may result in a gain or loss
for federal income tax purposes. Purchases of additional shares concurrent with
withdrawals may be disadvantageous to investors because of certain tax
consequences. If the amount withdrawn under the Systematic Withdrawal Plan
exceeds the dividends credited to an investor's account, the account may
ultimately be depleted. An application for participation in the Systematic
Withdrawal Plan can be obtained from the Funds.
NET ASSET VALUE AND DAYS OF OPERATION
The net asset value of each Fund for purposes of pricing purchase and
redemption orders is determined as of the close of regular trading hours
(currently 4:00 p.m. Eastern Time) on the Exchange on each day the Exchange is
open for trading. As a result, shares of the Funds will not be priced on the
holidays which the Exchange observes: New Year's Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. Net asset value per share is calculated by dividing the value of
all securities and other assets owned by each Fund, less the liabilities
charged to that Fund, by the number of the Fund's outstanding shares.
Securities which are traded on a recognized stock exchange are valued at the
last sale price on the securities exchange on which such securities are
primarily traded or at the last sale price on the national securities market.
Exchange-traded securities for which there were no transactions are valued at
the current bid prices. Securities traded on only over-the-counter markets are
valued on the basis of closing over-the-counter bid prices. Short-term
securities are valued at either original cost or amortized cost, both of which
approximate current market value. Restricted securities, securities for which
market quotations are not readily available, and other assets are valued at
fair value by the Manager under the supervision of the Board of Directors.
<PAGE> 48
PROSPECTUS 35
SHAREHOLDER REPORTS
Investors will be provided with a report showing the Funds' portfolios and
other information at least semi-annually; and annually, after the close of the
Funds' fiscal year, which ends September 30, with a report containing audited
financial statements. Except for automatic investment and systematic withdrawal
transactions, an individual account statement will be sent to the investor by
the Funds after each purchase, including reinvestment of dividends, or
redemption of Fund shares. Participants in the Automatic Investment and
Systematic Withdrawal Plans will receive quarterly confirmations of all
automatic transactions. Each investor will also receive an annual statement
after the end of the calendar year listing all transactions in shares of the
Funds during such year.
Investors who have questions about their account(s), have general questions
about the Funds, or desire additional information should call the Funds at
1-800-551-1700.
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES
In addition to any increase in the value of shares which a Fund may achieve,
shareholders may receive two kinds of return from the Fund: dividends and
capital gains distributions.
DIVIDENDS
Dividends from stocks and interest earned from other investments are the Funds'
main source of ordinary income. Substantially all of the income, less expenses,
of the Wasatch Aggressive Equity Fund, Wasatch Micro-Cap Fund, Wasatch Growth
Fund and Wasatch Mid-Cap Fund is distributed annually as dividends to
shareholders. Effective April 1, 1996, the Wasatch Income Fund will begin
declaring dividends of its net investment income daily and distributing the
dividends monthly. Prior thereto, the Income Fund will declare a dividend in
March 1996 which will include prior months' undistributed income.
CAPITAL GAINS
Net realized capital gains represent the total profit from sales of securities,
minus total losses from sales of securities, including any losses carried
forward from prior years. Any net realized capital gains resulting from the
operations of the Funds will be distributed annually.
Dividends and capital gains distributions from a Fund are automatically applied
to purchase additional shares of the Fund at the net asset value per share on
the payable date unless the shareholder has requested in writing to the
Transfer Agent that payment be made in cash. This option may be changed at any
time by written request to the
<PAGE> 49
36 PROSPECTUS
Transfer Agent; the election is effective for distributions with a dividend
record date on or after the date that the Transfer Agent receives notice of the
election.
TAXES
The Funds intend to qualify annually for and elect tax treatment applicable to
a "regulated investment company" under Subchapter M of the Code. Because each
Fund intends to distribute substantially all of its net investment income and
capital gains to shareholders, it is not expected that the Funds will be
required to pay any federal income taxes. Should a Fund fail to distribute the
amount required by the Tax Reform Act of 1986, as amended, during any calendar
year, the Fund would be required to pay a 4% nondeductible excise tax on the
amount of the underdistribution. Shareholders will normally have to pay federal
income taxes and any state and local income taxes on the dividends and
distributions they receive from a Fund. Shareholders not subject to tax on
their income will not be required to pay tax on amounts distributed to them.
Shareholders are advised to consult their own tax advisers with respect to
these matters.
At the end of each calendar year, shareholders are sent full information on
dividends and long-term capital gains distributions for tax purposes, including
information as to the portion taxable as ordinary income and the portion
taxable as long-term capital gains.
Prior to purchasing shares of a Fund, prospective shareholders (except for tax
qualified retirement plans) should consider the impact of dividends or capital
gains distributions which are expected to be announced, or have been announced
but not paid. Any such dividends or capital gains distributions paid shortly
after a purchase of shares by an investor prior to the record date will have
the effect of reducing the per share net asset value by the amount of the
dividends or distributions. All or a portion of such dividends or
distributions, although in effect a return of capital, is subject to taxation.
The Funds are required to withhold and remit to the U.S. Treasury 31% of
dividend payments, capital gains distributions, and redemption proceeds for any
account on which the owner provides an incorrect Taxpayer Identification Number
or no number on a new account.
<PAGE> 50
PROSPECTUS 37
ADDITIONAL INFORMATION
DIRECTORS
Samuel S. Stewart, Jr., Ph.D., Chairman of the Board
Jeff S. Cardon
James U. Jensen
Roy S. Jespersen
William R. Swinyard
INVESTMENT ADVISER
Wasatch Advisors, Inc.
68 South Main Street
Salt Lake City, UT 84101
ADMINISTRATOR AND TRANSFER AGENT
(effective February 19, 1996)
Sunstone Financial Group, Inc.
207 East Buffalo Street, Suite 400
Milwaukee, WI 53202-5712
CUSTODIAN
UMB Bank, n.a.
928 Grand Avenue
Kansas City, MO 64141
LEGAL COUNSEL
Michael J. Radmer
Dorsey & Whitney P.L.L.P.
220 South Sixth Street
Minneapolis, MN 55402-1498
INDEPENDENT AUDITORS
Arthur Andersen LLP
777 East Wisconsin Avenue
Milwaukee, WI 53202
<PAGE> 51
38 PROSPECTUS
WASATCH FUNDS
68 South Main Street
Salt Lake City, UT 84101
For Fund Information and
Shareholder Services:
1-800-551-1700
<PAGE> 52
PROSPECTUS 39
HOW TO OPEN YOUR ACCOUNT
(1) Carefully read the attached prospectus which contains more complete
information about the Funds.
(2) Complete the enclosed application form.
(3) Mail the completed form, along with your check payable to Wasatch Funds,
in the postage-paid envelope. Or call us for instructions on how to
arrange for a bank wire.
MINIMUM TO OPEN ACCOUNT:
- --------------------------------------------------------------------------------
Regular Account $2,000
- --------------------------------------------------------------------------------
Automatic Investment Plan $1,000
Automatic Investment Plan allows for investments directly from
your bank directly to the Fund on a monthly or quarterly basis
(subsequent automatic investment minimum is $50 per transaction
monthly/$100 quarterly)
- --------------------------------------------------------------------------------
IRA Account $1,000
- --------------------------------------------------------------------------------
IF YOU HAVE ANY QUESTIONS, PLEASE CALL 1-800-551-1700
<PAGE> 53
Wasatch New Account Application
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MAKE CHECKS PAYABLE TO: Wasatch Funds
MAIL COMPLETED APPLICATION TO: Wasatch Funds, P.O. Box 2172, Milwaukee, WI 53201-2172
TO CONTACT WASATCH FUNDS BY PHONE: Call 1-800-551-1700 for Fund information, literature, prices and Wasatch Fund account
information
====================================================================================================================================
1. INVESTOR NAME / / Individual
For Joint Account: Name Birthdate
Fill in Individual --------------------------------------------------------------------------------
and Joint Owner Social Security Number Citizen of / / U.S. / / Other
Information --------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
/ / Joint Owner-Registration will be JTWROS (Joint Tenant with Right of Survivorship)
unless otherwise specified.
Name Birthdate
--------------------------------------------------------------------------------
Social Security Number Citizen of / / U.S. / / Other
--------------------------------------------------------------------------------
/ / Gift to Minor
Custodian
--------------------------------------------------------------------------------
Minor Minor's Birthdate
--------------------------------------------------------------------------------
Minor's Social Security Number Citizen of / / U.S. / / Other
--------------------------------------------------------------------------------
Custodian's Social Security Number* Citizen of / / U.S. / / Other
--------------------------------------------------------------------------------
*This information is not used for tax purposes. It will be used for
informational purposes only.
/ / Corporation, Partnership, Trust or Other Entity
Name of Entity
--------------------------------------------------------------------------------
Taxpayer Identification Number
--------------------------------------------------------------------------------
====================================================================================================================================
2. MAILING ADDRESS / / Send Duplicate Confirmations to:
Street, Apt. Name
----------------------------------------------------------------------------------------
City/State/Zip Address
----------------------------------------------------------------------------------------
Daytime Phone Number ( ) City/State/Zip
----------------------------------------------------------------------------------------
====================================================================================================================================
3. YOUR INVESTMENT The minimum initial investment is $2,000 per fund.
INSTRUCTIONS ($1,000 if you are establishing an Automatic Investment Plan)
Minimum additions to any fund are $100; $50 for Automatic Distribution Options
Investment Plan Dividends *Dividends
and Capital and Capital
Gains Gains in
Amount Reinvested Cash
/ / Wasatch Aggressive Equity Fund
(Closed to new investors July 1995) $ / / / /
--------------------------------------------------------------------------------------------------
/ / Wasatch Micro-Cap Fund $ / / / /
--------------------------------------------------------------------------------------------------
/ / Wasatch Growth Fund $ / / / /
--------------------------------------------------------------------------------------------------
/ / Wasatch Mid-Cap Fund $ / / / /
--------------------------------------------------------------------------------------------------
/ / Wasatch Income Fund $ / / / /
--------------------------------------------------------------------------------------------------
/ / Northern U.S. Government Money
Market Fund $ / / / /
--------------------------------------------------------------------------------------------------
*If you choose NOT to reinvest dividends please attach a (If no distribution option is
voided check or deposit slip for your bank account. Your checked, dividends and capital
cash payment will be credited directly to this account. gains will be reinvested.)
====================================================================================================================================
4. PERIODIC / / I would like the following existing accounts linked to generate one combined statement
COMBINED with this new account:
STATEMENTS*
Account Number
-----------------------------------
*All accounts Account Number
opened with -----------------------------------
this application If you are not the registered owner, the registered owner must sign below.
will be linked
for a Periodic --------------------------------------------------------------------
Combined Statement. Signature
====================================================================================================================================
5. PAYMENT FOR / / By check payable to WASATCH FUNDS $
INITIAL PURCHASE -----------------------
/ / By wire: Call 1-800-551-1700 for instructions. Date of wire Amount $
-------- -----------
====================================================================================================================================
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6. CHECK There is a $500 minimum for any check written from the Northern U.S. Government Money
REDEMPTION Market Fund. Shares purchased by check may not be redeemed with checkwriting
SIGNATURE(S) for 10 days from the purchase date.
(For Northern / / Check this box and complete this section only if you would like checkwriting privileges
U.S. Government for the Northern U.S. Government Money Market Fund
Money Market
Fund Only) Name
--------------------------------------------------------------------------------------------------
Authorized Signatures
--------------------------------------------------------------------------------------------------
(Checkwriting is not valid unless all owners sign.)
Indicate the number of signatures that must appear on check.
/ / One Signature / / Two Signatures / / Three or more Signatures
====================================================================================================================================
7. TELEPHONE / / Telephone Exchanges. Allows exchanges between identically registered Wasatch
OPTIONS Funds and the Northern U.S. Government Money Market Fund. A $500 minimum applies to
exchanges.
/ / Telephone Redemption. Permits the redemption of a minimum of $1,000 and
maximum of $50,000. (A minimum of $500 must remain in your account to keep
account open.)
====================================================================================================================================
8. AUTOMATIC The minimum initial investment for an Automatic Investment Plan is $1,000.
INVESTMENT Please start my Automatic Investment Plan as described in the Prospectus beginning:
PLAN
Your signed / / Monthly - indicate month or
Application ------------
must be
received at
least 10 / / Quarterly in March, June, Sept. or Dec. - indicate month
business days ------------------------------
prior to I hereby instruct Wasatch Funds to automatically transfer
initial
transaction.
An unsigned, $ to the Wasatch Aggressive Equity Fund
voided check ----------
(for checking $ to the Wasatch Micro-Cap Fund
accounts) or ---------
a savings $ to the Wasatch Growth Fund
account ---------
deposit slip $ to the Wasatch Mid-Cap Fund
is required ---------
with your $ to the Wasatch Income Fund
Application. ---------
(minimum $50 monthly/$100 quarterly per Fund) directly from my checking, NOW or
savings account named below on the / / 5th and/or / / 20th of each month or the first
business day thereafter. I understand that I will be assessed a $15 fee if the
automatic purchase cannot be made due to insufficient funds, stop payment, or for any other
reason.
Name(s) on Bank Account
--------------------------------------------------------------------------------------------------
Bank Name Account Number
--------------------------------------------------------------------------------------------------
Bank Address
--------------------------------------------------------------------------------------------------
Signature of Bank Account Owner
--------------------------------------------------------------------------------------------------
Signature of Joint Owner
--------------------------------------------------------------------------------------------------
====================================================================================================================================
9. SIGNATURES I am (we are) of legal age, have received and read the Prospectus(es) and agree to the
AND terms therein. I (we) certify (1) that the Social Security or Taxpayer Identification Number
CERTIFICATION provided above is correct and (2) that the IRS has not notified me (us) that I am (we are)
subject to 31% backup withholding.
Signature of Individual
--------------------------------------------------------------------------------------------------
Signature of Joint Owner
--------------------------------------------------------------------------------------------------
Date
--------------------------------------------------------------------------------------------------
Signatures of Partners, Trustees or Others
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------
Date
--------------------------------------------------------------------------------------------------
====================================================================================================================================
PA-1/96
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